Rent-a-Jet Cachet

By Adam Zagorin/Washington

I used to ride around with my grandfather in a horse and buggy," remembers Katherine Buffett, 93, of her childhood on a Nebraska farm. "Sometimes he would let me drive the horse myself." These days, when Mrs. Buffett hunkers down in her Hawker 1000 jet, the pilot does not offer her the reins. But he always gets her back home to Omaha on time.

Katie Buffett has joined a growing, albeit still elite, list of Americans who have opted out of the joys of flying with commercial airlines. She recently bought a share in a private plane because her favorite nephew told her it would be a good idea. The nephew, billionaire investor Warren Buffett, thinks many more people will pay to avoid cooling their heels at gates and cramping their backsides into uncomfortable seats in the air. Buffett spent $725 million last year to acquire Executive Jet Aviation, operator of NetJets, which created a business in fractional ownership of aircraft. With revenues projected at $900 million for 1998 and climbing an average rate of 35% annually, the company instantly became the fastest-growing division in Buffett's Berkshire Hathaway empire, which includes stakes in American Express and Coca-Cola and ownership of Geico insurance.

Executive Jet is the brainchild of Richard Santulli, 54, a former leasing specialist from Goldman Sachs who still runs the company. What Santulli figured out is this: How many jets and how many owners do you need to ensure that each owner can be guaranteed a jet with as little as four hours' notice, anytime? Priced to make a buck, of course. Customers do not buy a particular plane so much as the right to fly on a jet of the class they have purchased. NetJets owners can purchase a fraction of a plane up to the whole thing and get a proportional share of its air time. A one-eighth share of, say, a Cessna Citation V Ultra goes for $835,000, and each hour of occupied flight will cost you $1,242. Management and other fees are around $7,600 a month.

Santulli's operation got lift because many companies couldn't afford--or couldn't justify--owning a jet outright. Yet as commercial service deteriorated, they also found themselves at the mercy of big airlines. Fractional ownership splits the difference: expensive, but cheaper than full board; and the convenience helps compensate for the cost. Just try flying on commercial airlines from Mobile, Ala., to Moline, Ill., nonstop. NetJet offers everything from small Cessna Citation S/IIs up to the new Boeing Business Jet, a reconfigured 737.

Executive Jet commands more than 75% of the fractional-ownership market--down from 100%. Its success has lured a couple of jetmakers into the game, including Raytheon, which sells Beech and Hawker jets. Bombardier, a leading competitor, is adding fractional owners at a rate of more than 100 a year; it has more than 350 clients using 65 Learjet and Challenger aircraft. A booming economy continues to enlarge the ranks of fractional flyers. Over the past 3 1/2 years, Executive Jet has ordered 590 aircraft, paying $9.75 billion and expanding into Europe and Asia.

Buffett, a famously frugal rich guy, found the concept so compelling that first he got rid of Berkshire's jet, the Indefensible, and then he bought Executive Jet. It's one of the few luxuries he can justify. "I sleep in a bed, you sleep in a bed; I go to McDonald's, you go to McDonald's," he told TIME. "For most things in life, being rich just isn't that much of an advantage. The one area where money has made a difference for me is the ability to travel efficiently and do things that would otherwise be impossible."

Like a couple of months ago, when he flew on a Gulfstream IV-SP to London, had lunch in Frankfurt and dinner near Paris (presumably not at McDonald's), then returned to Boston for a board meeting of Gillette, another major Berkshire holding--all within three days. Says Buffett, fractional-jet salesman: "Difficult to do that flying commercial." Aunt Katie would agree.