Graham Warwick/WASHINGTON DC

Investor Warren Buffett has agreed to acquire Executive Jet, operator of the pioneering NetJets business-aircraft fractional ownership programme. Buffett's holding company, Berkshire Hathaway, will pay $725 million, divided roughly equally between cash and stock, to merge with Executive Jet.

Richard Santulli, Executive Jet chairman and originator of the fractional-ownership concept, says the merger was agreed after "-examining financial alternatives to address the company's significant worldwide growth opportunities".

Executive Jet has aircraft worth $2.6 billion on order for NetJets and is already expanding into Europe and the Middle East.

"One of my principal objectives was to remain independent of any particular aircraft manufacturer and to maintain our ability to make investments that would be measured over the long term," says Santulli. He is "confident" that the merger will allow Executive Jet to build a global network.

Rival fractional ownership schemes, started mainly by aircraft manufacturers like Bombardier and Raytheon, have been intensifying competition in the sector in the past three years, although no competitor has come close to rivalling Executive Jet's dominance of the fast-growing market.

The company introduced NetJets in 1986, and has grown the fleet to more than 130 aircraft, of nine types, based in the USA and Europe. Based in Montvale, New Jersey, Executive Jet is the single largest customer for business-jet manufacturers Cessna, Dassault, Gulfstream and Raytheon.

Executive Jet says the 129 aircraft it ordered last year accounted for 31% of corporate jet sales in 1997.

The company is also the single largest customer for business-aircraft training provider FlightSafety International (FSI), which Berkshire Hathaway acquired in 1996 for $1.5 billion. After buying FSI, Buffett renamed his early-model Bombardier Challenger business jet Indispensable - it was previously nicknamed Indefensible.

Buffett was introduced to Executive Jet when his wife acquired a quarter share in a NetJets aircraft.

Berkshire Hathaway says the current management, including Santulli, will stay on at Executive Jet after the merger, in line with the Omaha-based holding company's normal takeover policy.

Source: Flight International