From Reuters,
“Bombardier Inc (BBDb.TO) has agreed to sell as many as 120 aircraft to Warren Buffett’s NetJets Inc in a deal that could earn it more than $6.7 billion.
The deal, consisting of a firm order of 50 jets and options to purchase a further 70, is the largest business aircraft sale for Bombardier, the world’s No. 3 civil aircraft maker after Airbus (EAD.PA) and Boeing (BA.N).
While airlines still account for the majority of corporate travel, many businesses are gradually returning to private planes. They are eager to avoid airport hassles, flight delays and other potential logistical snags associated with commercial flying.”
In the current economic climate, I think it is nice for Bombardier to have this deal. At the same time, I bet NetJets is getting a pretty good deal for the jets too. Alice Schroeder, Buffett’s biographer, wrote about NetJets earlier this week here and here before this deal. It will be interesting to hear what she has to say on this deal.
Now, here is a video clip of what Warren talking about the deal on CNBC (with transcript).
P.S. Warren has previous experience in airlines related investments. Since we are talking about a lot more money here, I hope it works out better (much better) this time around.
***
March 6th, 2011 Update: Financial Post, “Worldwide Private Aviation Leader NetJets Inc. Announces Purchase Agreement for Bombardier Business Aircraft” Here is an excerpt with emphasis and comment added. And yes, I was a bit of an idiot to miss it.
“The agreement includes a firm order from NetJets for 50 Global business jets valued at a retail price of $2.8 billion, with options for an additional 70 Global aircraft. The firm order comprises 30 Global 5000 Vision and Global Express XRS Vision aircraft, with deliveries scheduled to begin in the fourth quarter of 2012, as well as 20 firm orders for Bombardier’s newly-launched Global 7000 and Global 8000 jets, with deliveries of these aircraft to begin in 2017. At a total retail price exceeding $6.7B, this is the largest aircraft purchase agreement in the history of private aviation. Additional terms of the deal were not disclosed.”
[Kempton: First of all, how could I missed "retail price"?! You must be kidding me that Warren Buffett or CEO of NetJets David Sokol would pay retail price during a recession for jets! Therefore someheavy discounting is probably happening here. And the option for additional 70 jets, probably cost nothing or just a token amount.]
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