By Nicole Mordant
(Reuters) – NetJets, a private jet-sharing company owned by Warren Buffett’s Berkshire Hathaway Inc (BRK-A), said on Monday it would buy up to 425 new business jets from Bombardier Inc (BBD-B.TO) and Cessna in a deal worth $9.6 billion to expand its North American and European fleet.
The purchase, which NetJets described as the largest in private aviation history, includes up to 275 Bombardier Challenger business aircraft, the second time in 15 months that NetJets has placed a large order with the Canadian planemaker.
The Bombardier portion of the order, which is valued at $7.3 billion, is made up of 100 firm orders on two different types of Challenger jets, and options for 175 more, NetJets said. Deliveries of the different jets will start in 2014 and 2015.
“This is a very sizable order,” said PI Financial airlines analyst Chris Murray.
“Bombardier’s aerospace group usually does about $10 billion a year. This will be several years worth of business,” he said.
NetJets also said in a statement that it placed an order for 150 Cessna Citation Latitude business aircraft, including 25 firm orders and options for 125 more. Deliveries begin in 2016.
Cessna Aircraft Co, the world’s largest maker of business jets, is a subsidiary of Textron Inc (TXT).
NetJets said the addition of the new aircraft, along with recently-ordered Embraer Phenoms and Bombardier Globals, marks the launch of a new NetJets “Signature Series” of aircraft — planes that it helped design from start to finish.
“It’s a major step towards replacing their existing fleet, but it heavily depends on business jet demand and achieving a level of profitability that’s far from guaranteed,” said Richard Aboulafia, an aerospace analyst with Teal Group.
“NetJets has a track record of placing orders that fall by the wayside, for market reasons or company reasons. But assuming the market firms up, it’s good news for Bombardier and Cessna,” he said.
NetJets’ attraction for businessmen, entertainers and athletes has been the lure of owning access to a jet without the hassle of maintenance, crew, licensing and the like.
For many years, NetJets was the problem child of Berkshire’s global portfolio of businesses, despite having a market share an estimated five times the size of its closest competitor.
Over the last two years NetJets has turned around results, though, cutting its debt burden and swinging back to profitability. In February of this year, Buffett told investors that NetJets ended 2011 with an uptick in sales that was “more than seasonally normal,” a potential sign of an even greater rebound.
Last March, Bombardier said it would sell as many as 120 large business jets from its Global series to NetJets in a deal it said at the time could be worth more than $6.7 billion.
(Reporting By Nicole Mordant in Vancouver; Additional reporting by Aman Shah in Bangalore, Ben Berkowitz in New York and Karen Jacobs in Atlanta.; Editing by Bernard Orr)