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Sunday, August 1, 2004

Maintaining the Fractional Fleet

Maintenance impacts every aspect of the NetJets operation. Here is a look at the challenging job of keeping the company's high-utilization fleet flying safely and efficiently.

Every morning at NetJets headquarters in Columbus, Ohio, a group of key people meets in the "war room." The discussion focuses on service, with people from every major division of the company sharing how the previous day went and what to expect during the coming day and week. NetJets managers mention the names of shareowners, who have purchased anything from a 1/16th share to an entire business jet, and candidly assess whether the service delivered met not only the owners' expectations but also the high standards set by NetJets. Criticism and kudos share the stage; no one is immune from assessment by their peers. But, more importantly, no one is immune from the opportunity to learn by sharing critical information. And NetJets, and its leadership, isn't shy about making sure everyone on the team is communicating, sharing information, and learning how to improve the service. As Richard Smith, NetJets executive vice president, likes to say, "maximize availability and minimize downtime." And, "we like to beat the terms of the contract."

In the great scheme of NetJets, maintenance is obviously one of many important parts of the company. But it's abundantly clear in the morning meeting that maintenance impacts every aspect of the NetJets operation and maintenance has an enormous impact on the customer experience.

At NetJets, maintenance is a key element of fractional aircraft ownership that NetJets makes sure to highlight in material provided to customers. On the NetJets website (www.netjets.com), there is a white paper specifically on maintenance that explains the company's maintenance philosophy and the regulations under which it maintains the fleet. This may look like typical boilerplate prose to an average non-aviation person, but the NetJets maintenance program is focused on keeping the fleet flying, which it does to a much greater degree than the average corporate jet.

The key element of the NetJets maintenance program is that much of the maintenance is done either by factory-owned or -authorized maintenance facilities. Netjets has its own in-house maintenance department, which mostly does routine maintenance as the airplanes cycle through Columbus and the company's Executive Jet Management facility in Cincinnati, Ohio. Generally, heavy maintenance is outsourced to the factory maintenance facilities, and the ratio of in-house to outsourced maintenance is about 35-65. "The goal is to go to 50 percent in-sourced," said Smith.

All jets are tracked by the company's Aircraft Maintenance Control Center at the Columbus, Ohio headquarters, and AMCC personnel oversee all aspects of maintenance and work closely with the manufacturers of the airplanes, engines, and components to make sure the fleet remains available to serve NetJets customers.

The NetJets fleet generates enormous numbers of maintenance man-hours, in excess of 500,000 per year, all the result of around 650 flights occurring on an average day. At any given time, there are dozens of NetJets airplanes in the air; on one typical afternoon, 71 of the fleet were flying in the U.S.

The number of NetJets annual maintenance events runs 35,000 to 40,000. In a recent 12-month period, for example, the NetJets fleet racked up 4,200 scheduled maintenance checks, 9,000 minimum-equipment list repairs/cleared items, 7,500 night events (mostly routine items), and an amazing 20,000 unscheduled maintenance events. Helping make all this maintenance happen are the people running the Maintenance Control Center. They handle 40,000 telephone calls and move 80,000 pieces of paper per month and track 136,000 different aircraft components.

To help with the challenging job of tracking all of this maintenance information, NetJets has begun switching over to Mxi Technologies's Maintenix software, which has been in use by NetJets sister company Executive Jet Management for more than three years. Maintenix will greatly simplify the job of inputting maintenance problems from either field personnel or Maintenance Control. Eventually, outside maintenance vendors may be able to hook their systems into Maintenix, which is web-based, so they can more easily take care of NetJets jobs. This will help NetJets monitor maintenance being done on its airplanes, avoiding the typical reams of paper faxing back and forth across the nation.

NetJets is just beginning to adopt another modern piece of technology, trend monitoring of engines. The challenge for NetJets, with so many airplanes, is getting data from the airplane. Of course, most modern airplanes have a system to download data onto a notebook computer, but this could be a logistical challenge for hundreds of airplanes and for many different types of airplanes. What the company really would like is a system where the operational and maintenance data would simply download automatically when the airplane taxies by the NetJets hangar.

Helping the OEMs

Where tracking of maintenance information really shines is in sending data back to aircraft, engine, and component manufacturers about the performance of their products. Because the typical NetJets airplane flies hundreds more hours per year than an average corporate jet, the manufacturers have a rich trove of reliability data in NetJets.

"We've helped the industry in a lot of ways," said Mark Reed, vice president of maintenance. One example is a landing gear overhaul that NetJets data helped move to 5,000-cycle intervals, up from 4,000 cycles. Smith and Reed would also like to educate manufacturers about their interiors, which remain entirely too customized. Interiors should be easier to replace and more reliable, in terms of maintenance. In the case of the Cessna Citation X, serial numbers after 256 will feature a rotable interior that NetJets will rotate out every two years. This is just another example of a manufacturer paying attention to useful information generated by an operator.

That NetJets puts so many hours on its airplanes helps manufacturers learn a lot much faster than with traditional corporate operators. But there is more that manufacturers could do, according to Smith. "We as well as our vendors have to get teardown reports on failed components. If it's only lasting for 500 hours instead of 5,000 hours, we won't stand for that. How did we get the landing gear from 4,000 to 5,000 cycles? We got teardown reports."

Fractional Future

With so many airplanes generating so much information, it's natural that running NetJets involves managing a huge flow of data. But it's also critically important not to get lost in that sea of data but to remember that the goal is to serve the customer first. The criteria for repairing discrepancies is a good example. Instead of handling airplane squawks in the most efficient way, the NetJets criteria is geared toward the customer. Either the item must be fixed for legal reasons, or if it is in any way embarrassing for something not be working, such as a passenger-convenience feature, then the airplane will be grounded until it is repaired.

And it's not enough to handle problems as they develop. The mantra at NetJets is to develop a way to run the company while focusing on continuous improvement. NetJets calls this the Business Operating System. The system incorporates ISO quality criteria and concepts developed by quality guru Malcolm Baldridge. "You look at existing processes," said Smith, "and document them. You analyze and measure them and use the results to continually improve."

Why Does NetJets Work So Closely with OEMs?

There are probably plenty of non-factory-authorized maintenance facilities that would like to vie for some of the business generated by NetJets, but the company sticks to factory-authorized facilities and also sends a lot of maintenance business to factory-owned maintainers.

The reason can be summed up by this quote from NetJets chairman and CEO Richard Santulli: "NetJets guarantees aircraft availability 24 hours a day, 365 days a year, and we need a superb service organization to back us up."

An example of NetJets's relationship with OEMs is a recently-signed 10-year maintenance contract with Raytheon Aircraft for Hawker jet service.

But OEMs aren't the only companies to get business from NetJets. Jet Aviation, which holds factory authorization for a number of aircraft models, recently signed a letter of agreement to provide unscheduled maintenance services to NetJets airplanes at Jet Aviation's facilities in Bedford, Massachusetts, Dallas, Texas, and Palm Beach, Florida. Jet Aviation also provides maintenance to Europe-based NetJets airplanes.

One factor in Jet Aviation's favor is that the company was willing to work after normal hours to serve NetJets. And Jet Aviation is also working on creating a mobile unit to facilitate off-site support.

What Makes NetJets Work, and How to do Business with NetJets

The concept of selling shares of business jets has succeeded because of NetJets chairman and CEO Richard Santulli's innovative vision and dedicated effort. Santulli bought management company Executive Jet in 1984 and introduced the NetJets fractional share program in 1986, starting with just a handful of airplanes and a small number of customers. As of mid-2004, NetJets has grown to a fleet of nearly 400 jets and more than 3,500 shareowners, and the company has 800 more business jets on order.

What Santulli, who was a principal at Goldman Sachs, did was figure out a way to turn business jets into a commodity. In the case of business jets, their cost is a significant barrier to entry for the average buyer. And this naturally limited the size of the business jet market. But what if you could offer a jet—or at least some useful part of a jet—for a more reasonable price? How would that affect the market?

Santulli and company found out quickly that once they solved the logistical problem of having enough jets to deliver the promised service to the customer, then the market was huge. The fractional share companies like NetJets, Flexjet, Flight Options, CitationShares, and others discovered a large untapped market of people who loved the idea of being able to buy 100 or more hours of jet time per year. Recognition of the breakthrough made by Santulli came in 1998, when Warren Buffet's Berkshire Hathaway bought NetJets for $725 million. Buffet's family had been NetJets customers for a few years prior to the acquisition. And as is typical with a Berkshire Hathaway purchase, the existing management team was kept intact.

Most buyers of fractional shares, according to the providers, are not existing business aviation users. This means that the fractional companies created a dynamic new market. The jets that they operate are a significant percentage of the business jet fleet, about 10 percent now, projected to grow to more than 20 percent by 2012.

The smart maintenance providers recognize this and have figured out how to serve the fractional companies. There is no way that NetJets can do all the maintenance for its huge fleet, and plenty of savvy companies have tailored their service to the fractional companies. This is good for the maintenance business, not only for the potential increased income, but also for the flow-down of service improvement. NetJets has high standards, and it can't hurt the aviation business to learn how to meet and exceed those standards.

For those interested in doing business with NetJets, the place to start is figuring out what the customer wants. NetJets isn't shy about revealing its needs, in fact the company holds "NetJets 101" classes for interested vendors and even an annual awards ceremony to honor vendor contributions.

On the maintenance side, what NetJets wants is simple: efficient service when required. With more than 20,000 unscheduled maintenance events occurring every year to the hundreds of jets in the fleet, there certainly is opportunity for companies who want to do some business with NetJets.

Obviously, safety and quality go without saying. Beyond those basics, what NetJets really needs is quick service when the airplanes aren't flying. "[We want] line maintenance at our hours," said Richard Smith, executive vice president. "It's been a struggle to get line maintenance. We want to work with somebody who wants to do business with us, but on our agenda. Those that want to grow with this company have to change their mindset."

What Smith is complaining about is that even at the top ten airports that NetJets airplanes frequent, there is little availability of maintenance during off-hours. The NetJets fleet is usually flying during the day; that's when shareowners want to use their hours. So the best time to do maintenance is at night, but most maintenance shops are closed at night. "Those who have performed for us in the past have benefited," Smith noted. "It takes commitment and performance. And, we pay our bills."

"If we could solve the unscheduled maintenance problem," added vice president of maintenance Mark Reed, "we'd be much more efficient."

The aircraft manufacturers that offer maintenance are getting the picture, according to Smith. Raytheon, Gulfstream, and Cessna have stepped up and are working to turn NetJets airplanes quickly during off hours. Independent (factory-authorized) repair stations could find some good business opportunities by listening and learning from NetJets.

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