The new competitor to Berkshire Hathaway Inc.'s private aviation subsidiary, NetJets Inc., is a Los Angeles company formed by five executives who left NetJets after it went through a cost-cutting reorganization.
"I have no hard feelings about it," said Bill Papariella, CEO of Jet Edge International. "I don't know if they love me. I think they're a great company. The business is just shifting and moving right now. We saw opportunities."
NetJets is a leader in what's called the fractional jet ownership industry. Rather than owning a jet airplane outright, businesses and wealthy individuals become part-owners, essentially paying for private jet travel by the hour with NetJets or the other companies handling aircraft maintenance, pilots and other details.
NetJets said it is focused on its own business and does not comment on other companies in the business.
NetJets, purchased by Omaha-based Berkshire in 1998 for $725 million, had been losing money until 2009 when Warren Buffett, chairman and CEO of Berkshire, put David Sokol in charge. Sokol reorganized NetJets' operations, and by 2011 it was profitable. Sokol resigned from Berkshire last spring.
In June 2011, Papariella and fellow NetJets executives DJ Hanlon, David Pritchard, Stephanie Greer and Kevin Schwimmer were operating the West Coast office of NetJets, which Papariella said accounted for about 30 percent of NetJets' business.
In July, together with Richard Bard of Bard Capital Group, they purchased Western Jet Aviation of Los Angeles, whose CEO, Jim Hansen, joined them to form Jet Edge.
Papariella said the group left NetJets because of the reorganization, and he described it as "a very entrepreneurial moment for us."
"It just wasn't what we wanted to do anymore," Papariella said. "But that doesn't mean NetJets was the big bad wolf for us. We still have a lot of good friends there. We're in the business of helping people find solutions that fit, whether that's staying with NetJets or coming with us. Sometimes we advise people to stay with them."
Papariella said he and the others have since been replaced at NetJets. Western Aviation had 15 employees and $9 million a year in revenue when Jet Edge purchased it and now has 78 employees and $27 million a year in revenue, with 112 airplanes and about 200 customers, he said.
Two airplanes are based in Asia, and 26 more employees are in China, getting ready to open a new joint venture there in a few weeks, Papariella said.
He said the business became possible because of the 2008-09 recession, which hit the aviation industry hard as individuals and corporations cut back on flying. Aircraft values declined and new aircraft purchases slumped.
Papariella said that opened the way for the Western Aviation purchase and formation of Jet Edge, opportunities that were "too hard to turn down."
At the same time, flight customers wanted to control costs, and Jet Edge could provide a wide range of aircraft to fit the needs of each trip, rather than locking customers into certain aircraft. For example, he said, a short family trip to Aspen for a skiing vacation may call for a smaller airplane than a business trip to Brazil, saving customers money in the process.
"NetJets' model, I think, was not conducive to the masses any more," Papariella said. "We felt there was a significant opportunity to build a boutique, hand-holding service for private fliers that want multiple solutions with several choices, versus just being jammed into one product."
He said the options mean Jet Edge's rates can be 30 percent to 40 percent less than NetJets'.
Papariella said the recession also has meant that many individuals and businesses with private jets suddenly couldn't afford them without generating revenue by letting others use them. Jet Edge is working out charter arrangements with those airplanes, as well as its own aircraft, and with other jet fleets including Cessna Aircraft Co.
In a statement, NetJets said its clients have access to its entire fleet of jets, offering 13 different light, midsized and large cabin aircraft. Clients can purchase shares of an aircraft that best meets their travel needs but also can exchange among other types for specific flights, NetJets said, adding that it has "the largest, most diverse fleet of private jets in the sky."
The Omaha World-Herald Co. is owned by Berkshire Hathaway Inc.
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