Jonathan Rosenthal quit his job as a lawyer and took what little cash he had ($7,000) to help start NetAir International. His mission was to create the Hertz of jet charters. Five years later, his Van Nuys company is off the ground, even if his original idea keeps bouncing back to Earth.
"Oh, nothing ever goes according to the game plan," he said.
Rosenthal, now 32, was only a few years removed from law school when he left his job as a corporate lawyer in Denver and began to woo celebrity investors, including former astronaut Wally Schirra and former New York Mayor John Lindsay ("I trust him and I don't trust many people," Lindsay said). Schirra and Lindsay not only invested money in NetAir, they joined the company's board of directors.
The company, which has since moved to Van Nuys, made its first flight in April, 1985. Today, on an hour's notice, NetAir customers have access to 90 planes at 18 airports across the country. Although the crews wear NetAir uniforms and serve drinks with NetAir cocktail napkins, NetAir doesn't own the planes or employ the crews. Rosenthal signed up various charter companies that were already in operation. NetAir hires the local charters at wholesale rates. In turn, NetAir charges its own customers 10% to 12% over the wholesale fee.
Rosenthal figured there was a niche waiting to be filled for corporations that absolutely, positively had to get one of their executives to an out-of-the-way place, or for those executives worn down by the tumult that has become airline travel. "Convenience to a business guy is everything," he said.
Not necessarily. A chartered jet costs about $2-$3 a mile. The tab for a small Learjet with crew is $950 an hour; a 15-seater Gulfstream jet goes for $3,250 an hour. In contrast, first-class travel on an airline runs about 30 to 50 cents a mile.
"What we didn't anticipate was the resistance to the higher price," Rosenthal said.
By this time a year ago, NetAir had spent much of the $1.7 million it had raised from a stock sale in marketing, advertising and start-up costs. But charter sales were running barely $400,000 a year, while the company had rung up $1.3 million in losses over three years. As Schirra put it, "You find a new gas station or you stop running."
To Rosenthal's credit, he found one. Last year, NetAir, in a gnat-swallows-an-elephant manner, bought two companies with combined revenues 12 times its size. "I'm sort of a deal guy. We all need to play to strengths," Rosenthal said. With the deals have come added financial stability and the chance to buy enough time to make the national charter system grow.
The national rent-a-jet network has been a tough sell, partly because the air charter industry is horribly fragmented. In the Los Angeles Yellow Pages, there are 40 air charter firms listed.
Phil Wolf, manager of corporate aviation for Unocal, based in Los Angeles, said he'd never heard of NetAir. What happens if a Unocal executive has to get somewhere and the company's fleet of planes is tied up? "We just send him on a commercial flight," he said.
Don Ebbert, chief pilot and department manager for Lockheed's Burbank flight operations, has never heard of NetAir either. "There are a lot of different outfits. When you don't use them, the names get fuzzy." When Lockheed is a plane short, he said, it swings a deal with another corporation to use one of their planes.
So a year ago, NetAir added some ballast to its listing balance sheet by acquiring National Jet Charter, a Van Nuys concern that was already part of the NetAir network, but was a thriving charter operator on its own, doing about $2 million a year in sales. NetAir bought the company for 4.8 million shares of stock.
Then in December, NetAir swung a deal to buy ADE Manufacturing in Irwindale, a maker of hydraulic aircraft parts--valves and landing gears for military jets, such as the F-16. It, too, was profitable, doing $4 million a year in sales. NetAir paid $761,000 cash, plus 3.4 million shares of stock.
The result: For the fiscal year ended in March, NetAir grew dramatically, posting sales of $3.5 million. Partly because of acquisition costs, however, the company lost $454,789.
The remarkable thing is that Rosenthal was able to make the deals in the first place. Capital Bank of California ponied up the cash. "I decided to take a chance on them," said Ellis Gordon, Capital's branch manager in Century City. "Something is going to blossom."
Rosenthal expects the flowering to take place in the current fiscal year, with profits of $250,000 to $500,000 on sales of $8 million to $10 million. "Now we're making money, kicking ass and taking names," he said.
Well, not exactly. In the first quarter ended June 30, NetAir turned its first quarterly profit, all of $26,191, on $1.5 million in sales. You still need a magnifying glass to read the stock price. Trading over the counter, the stock traded last week at 31 cents a bid. Nearly three years ago, the stock went public at the equivalent of 45 cents a share.