Frax Industry Founder Steps Down from NetJets
In a seismic event for the business aviation industry, NetJets founder, chairman and CEO Richard Santulli yesterday resigned his position at the company, effective immediately. Santulli, credited as the “father of the fractional aircraft industry,” said he will remain with NetJets–a Berkshire Hathaway company–as a consultant for at least a year. David Sokol, the chairman at Berkshire-owned MidAmerican Energy Holdings, is now chairman and interim CEO of NetJets “to allow for a smooth transition,” the parent company said.
“After 25 years of working with the most talented group of people I could ever have imagined, who helped build the premier aviation company in the world, I have decided to step down…to spend some more time with my young family and pursue other interests,” Santulli said in a prepared statement issued last evening. “I want to personally thank everyone at NetJets for all of their tireless energy, intelligence and support throughout all of these years.”
After a successful stint at Goldman Sachs, Santulli left in 1986 to start a company that sold fractional shares in aircraft, a previously untried concept. He acquired Columbus, Ohio-based Executive Jet Aviation as a platform upon which to launch NetJets. Although the company struggled in its early years, NetJets started gaining momentum in the early 1990s and by the end of the decade had become more than just successful. Berkshire Hathaway chairman and billionaire Warren Buffett, a NetJets shareowner, was so impressed with Santulli’s NetJets that he bought the firm in 1998 for $725 million and, as per Buffett’s custom, kept the company management in place.
“It is with reluctance that I accept Richard’s decision to step down,” Buffett said yesterday. “Richard Santulli is synonymous with the fractional jet ownership industry, and his vision and energy have made NetJets the leader that it is today.”
While it’s unclear why Santulli decided to leave, some sources suggest NetJets’ current finances might have been a factor, especially since Berkshire’s second-quarter results are scheduled to be released later this week. Under Santulli’s leadership and Berkshire’s ownership, NetJets was recording record profits this decade, until the latest recession caught up with the fractional provider. In the first quarter NetJets sustained a pre-tax loss of $96 million versus pre-tax earnings of $45 million in the year-ago period, according to a Berkshire financial report. “Revenues of NetJets in [first quarter] 2009 as compared to 2008 declined significantly as a result of an 80-percent decline in aircraft sales, as well as lower flight revenue hours,” the report noted. If this downward trend has continued, then the second-quarter financials for NetJets could be uglier.
Further industry speculation is that Santulli was protective of employees to the point that it might have interfered with rightsizing measures during this recession. There have been no announced layoffs at NetJets, despite the fact that the other three major fractionals have all gone through several rounds of layoffs since last fall.
But whatever the reason for his departure, don’t count Santulli out just yet, industry observers say. “Richard will continue to play an important role in the business aviation industry,” National Air Transportation Association president James Coyne told AIN