A decline in regional-airline training business and continued losses on European fractional-ownership operations forced a drop in 2003 revenues and earnings from US investment firm Berkshire Hathaway's flight services sector, which comprises industry leaders FlightSafety International and NetJets.

Revenues declined from $2.84 billion in 2002 to $2.43 billion last year, and pre-tax earnings from $225 million to $72 million. Revenues fell $96 million at FlightSafety on lower regional airline training business, offset somewhat by higher US government training.

NetJets saw fractional aircraft sales drop $514 million, but this was offset by higher flight services and other revenues for an overall decline in 2003 of $310 million.

Berkshire Hathaway chief executive Warren Buffett says FlightSafety's "normal" operating earnings declined from $183 million in 2002 to $150 million last year. This excludes a $60 million pre-tax gain in 2002 from the sale of its interest in FlightSafetyBoeing, and a $37 million pre-tax loss in 2003 from the premature obsolescence of simulators. FlightSafety has faced increasing competition for regional business from CAE.

A modest operating profit for NetJets in the USA was more than offset by a $32 million loss on aircraft inventory and continued losses in Europe, says Buffett. The inventory write-down was the result of falling prices for used aircraft early in 2003. NetJets bought back fractions from withdrawing customers at prevailing prices, and the aircraft fell in value before the shares could be remarketed. Prices are now stable, he says.

Pre-tax net loss before the inventory write-down was $9 million, compared with a $19 million loss in 2002 largely due to NetJets' European operations.

There are no plans to withdraw from Europe, despite the "painful" losses, Buffett indicates, adding: "Any company that forsakes Europe, as our competitors have done, is destined for second-tier status."

NetJets' European management and flying revenues increased 77% in 2003, and the loss is expected to reduce this year and be more than offset by US profits.


Source: Flight International