Warren Buffett’s Berkshire Hathaway Inc. will make loans to clients of its luxury air-travel unit after sales declined during the financial crisis.
The financing minimum is $100,000 and the loans are available only to commercial customers, according to a statement today from Omaha, Nebraska-based Berkshire’s NetJets business.
NetJets returned to profit this year with pretax earnings of $158 million through September. Buffett is trying to help a unit he called Berkshire’s “major problem” for 2009, when the credit crunch prompted cash-strapped clients to give up their accounts. NetJets Chief Executive Officer David Sokol, who took over in August of last year, has fired pilots and sold aircraft to cope with the slump in demand.
“Owners are able to structure a payment solution that exactly meets their needs,” Sokol said in the statement.
NetJets clients share ownership of a fleet of planes operated by the Berkshire unit. The so-called fractional jet ownership allows wealthy individuals and companies that don’t maintain executive planes to arrange private flights.
Credit approval for the loans may take “as little as a few days,” NetJets said. The loans are fixed-rate and have terms as long as five years, the company said.
Buffett, Berkshire’s 80-year-old CEO, bought NetJets in 1998 and bankrolled the company’s expansion under founder Richard Santulli. In 2009, the unit lost “a staggering” $711 million, Buffett told shareholders in February. That brought its aggregate pretax loss over Berkshire’s 11 years of ownership to $157 million.
“We had a whole number of customers who had gotten into financial difficulty,” Sokol, also Berkshire’s top energy executive, said in an August interview. The credit crunch “caused a lot of people who couldn’t afford to be flying privately to step back away.”
Sokol cut debt at Columbus, Ohio-based NetJets to $1.4 billion at the end of December from $1.9 billion in April 2009, when Santulli was in charge. Buffett, in his annual letter to shareholders, praised Sokol’s work.
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