It’s no secret that private jets are a lightning rod for climate campaigners. As you know, Sentinel Aviation would be the first to cheer the day we have zero carbon aviation. However, the industry is getting a powerful endorsement from the person behind its biggest player.
Warren Buffet was speaking at Berkshire Hathaway’s annual shareholders meeting and responding to a question about the boss of his private aviation company, Adam Johnson.
Of the NetJets CEO since 2015, he said, “Adam Johnson has performed; you can’t believe what he’s done with the business.” He added, “It was a tough model for a long time, but [Johnson] has brought it where it is, and we should have a wonderful company forever.”
In fact, in 2009, hamstrung by the Financial Crisis, NetJets posted a $711 million loss. NetJets currently has a backlog of customer orders backed by nonrefundable deposits that stretch well into 2024. If you are worried about the cost of flying privately, the Oracle of Omaha spoke to that point as well during what’s dubbed Woodstock for Capitalists.
As Buffett told the audience, “Your heirs are paying for it…Find me anybody whose estate came in less than zero because of what they spent on NetJets…let me know. I haven’t seen a case yet.”
Buffett’s views on aviation, in general, hasn’t always been glowing
He wrote of the industry in Berkshire’s 2007 annual report, “Here a durable competitive advantage has proven elusive ever since the days of the Wright Brothers. Indeed, if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down.”
Warren Buffett may rank among the wealthiest people on the planet, but he’s known for his frugal habits and modest lifestyle. The billionaire investor and Berkshire Hathaway CEO initially balked at the idea of owning a private jet, but ultimately embraced the luxury and convenience.
Warren Buffett nicknamed his private jet ‘The Indefensible’ – then renamed it ‘The Indispensable’ after realizing its value.
Warren Buffett may rank among the wealthiest people on the planet, but he’s known for his frugal habits and modest lifestyle. The billionaire investor and Berkshire Hathaway CEO initially balked at the idea of owning a private jet, but ultimately embraced the luxury and convenience.
A triumph over thriftiness
Buffett was riding high in 1986 after growing Berkshire’s net worth by over $600 million or 48% the previous year. He called up Walter Scott Jr., a fellow executive and longtime friend, to ask how he could possibly justify buying a plane for himself.
“Warren, you don’t justify it, you rationalize it,” Scott replied. Buffett followed his advice and “sheepishly” spent $850,000 on a used Falcon 20 jet, author Alice Schroeder wrote in “The Snowball: Warren Buffett and the Business of Life.” Buffett wrestled with the ostentatious purchase because it clashed with his upbringing and self-image. He was so miserly that when The Washington Post’s publisher and his close friend, Katharine Graham, asked him for a dime to make a phone call at the airport once, he pulled out a quarter and started rushing off to get change. She eventually convinced him to let her squander 15 cents.
“For Buffett, it was like leaping in one bound over Mount Kilimanjaro to go from justifying 25 cents for a phone call to rationalizing two pilots and an entire airplane to carry him around like a pharaoh on a litter,” Schroeder said in her biography of the investor.
Yet Buffett swiftly embraced the high life. He sold the first jet and splurged $6.7 million on a different used jet in 1989, he admitted in his yearly letter to Berkshire shareholders. He joked they might “understandably panic” if the cost of upgrading the plane kept multiplying like bacteria, as it wouldn’t be long until Berkshire had its entire net worth wrapped up in a single aircraft.
“Charlie doesn’t like it when I equate the jet with bacteria; he feels it’s degrading to the bacteria,” Buffett quipped, referring to his business partner, Charlie Munger. He also revealed the nickname they had chosen for the uncharacteristic indulgence: “The Indefensible.”
Buffett poked fun at his hypocrisy in his 1992 letter, framing his purchase as a display of “uncharacteristic flexibility. For years, I argued passionately against corporate jets,” he said. “But finally my dogma was run over by my karma.”
Planes and buses
Buffett may be a fan of luxury travel, but Munger considers it frivolous. “The back of the plane arrives at the same time as the front of the plane, invariably,” Berkshire’s vice-chairman said at the 1994 shareholder meeting.
“His idea of traveling in style is an air-conditioned bus, a luxury he steps up to only when bargain fares are in effect,” Buffett teased Munger in his 1989 letter. The investor noted in his 1990 letter that if he died the next day, Berkshire’s earnings would jump by $1 million annually as Munger would immediately sell the company plane.
Moreover, when Buffett was asked at the 1994 meeting if a new cross-country service would spur him to cut back on private flights, he jokingly accused Munger of hiring the audience member to shame him. “This is a question planted by Charlie,” he said, before underscoring how much he enjoys the plane.
“I take it to the drugstore at the moment,” he said. “It’s just a question of when I start sleeping in it at the hangar.” Buffett ultimately overcame his qualms and championed the plane’s value, rebranding it as “The Indispensable.”
