(Updates with Campos crash in 13th paragraph.)
Aug. 21 (Bloomberg) -- For an increasing number of wealthy Brazilians, first-class perks on airlines don’t cut it anymore. They’d rather just fly in a private jet.
A rise in high-net-worth individuals in Latin America’s biggest economy is keeping demand in Brazil strong at NetJets, a unit of Warren Buffett’s Berkshire Hathaway Inc., after record sales last year.
NetJets pioneered fractional ownership for private jets 50 years ago. Its clients include corporate executives and wealthy individuals who pay for a stake in an airplane in exchange for flight hours.
“2013 was our best year ever in the country and that really has shown no signs of abating this year,” said Patrick Gallagher, NetJet’s sales chief, in a telephone interview on Aug. 19. It’s too early to tell “whether that’s because we’ve made a more concerted effort to focus on sales there or whether it’s a function of just market improvement or changing dynamics in the economy.”
The number of high-net-worth individuals in Brazil rose 17 percent to 172,000 in 2013 from 2009, according to the World Wealth Report, compiled by Capgemini Financial Services and RBC Wealth Management. Brazil counts 15 of its citizens among the world’s richest 300 individuals, according to the Bloomberg Billionaires Index, with a combined net worth of $132 billion, an increase of $17.7 billion from a year ago.
Brazil’s biggest companies have seen revenue and profit grow over the past four years even as the economy has slowed. At the same time, commercial airlines are cutting back on first class seating in favor of business class.
Buoyed by rising earnings, corporations and wealthy individuals are seeking out NetJets either for shared ownership of large cabin jets or to lease time for travel within the U.S.
NetJets provides financial incentives for customers to buy shares in Bombardier Inc.’s Global 5000 and 6000, which can fly 6,000 nautical miles (11,112 kilometers), or from Sao Paulo to Stockholm. The jets have perks like a private state room and lavatory, and extra soundproofing.
Another option is leasing time on planes through NetJets Marquis Jet Card program, which allows customers to buy 25 or 50 hours of flight time on the aircraft of their choice.
“There’s probably a bigger overall market opportunity there just because of the sheer number of people who can afford that versus buying a large share of a large cabin airplane,” Gallagher said.
Brazilians who have homes in Miami and New York fly to the U.S. on commercial airlines, and then use the Marquis card to fly domestically, he said.
The Columbus, Ohio-based company doesn’t currently operate within Brazil, though it started to pay more attention to the country after interest began increasing in 2012. Given the demand it’s seen, NetJets may reconsider its Brazil operations, Gallagher said. It’s weighing placing staff in Sao Paulo permanently.
Brazil experienced a high-profile accident involving a business jet last week. Presidential candidate Eduardo Campos died after a nine-seater Cessna 560XL crashed following an aborted landing because of bad weather. The two pilots and four members of Campos’s campaign on board also perished.
Gallagher declined to give revenue figures for NetJets in Brazil, where the company’s inbound traffic surged during the World Cup.
Much of that came from existing customers who hadn’t used their services to fly to South America before, Gallagher said. The company anticipates that the success of the soccer championship will continue to drive traffic to Brazil from the U.S., including for the 2016 Olympic Games in Rio de Janeiro.
“There’s an incredible amount of demand there,” he said.