Buffett gambles on buying low and flying high with NetJets

Investors are wondering whether billionaire investor Warren Buffett’s latest foray in to private jets will take off or end up crash landing.

Buffett has a history of coming up with the goods, but spending US$9.6 billion on a fleet of business jets to fly corporate suits, the wealthy and celebrities around the world could be a long shot.

The plan is simple – Buffett’s NetJets sees the global housing market bottoming out to spread confidence and growth around the world’s economy. This feel-good factor will promote business and as businesses grow, customers for private jets.

The question is one of trusting Buffett’s judgment.

The deal is a record order for private jets – and the third multi-billion dollar order in two years.

The airline ordered 120 planes worth around $6.7 billion from Bombardier ijn March last year, and 125 Embraer Phenoms listed at $1.05 billion in October 2010.

That $17 billion is serious money to bet on the current stagnant global housing market.

Netjets has negotiated a tough deal with plane makers Bombadier and Textron for 425 small jets for up to around 20 passengers.

Part of the order is to replace older planes, while around 75% will increase the fleet of 700 or so jets.

The big surprise is the timing of the order. Profits are falling for many airlines as falling bookings, increasing taxes and higher fuel costs combine to weigh down trading.

News of the order does come at a time when China has announced a massive investment in airports and commercial aircraft.

Beijing plans to build 70 new airports, revamp 100 others and buy in 300 airliners a year between now and 2015.

Both Buffett and Beijing are gambling on buying low and flying high in the medium term with their investments.

**Image taken from Wikipedia

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