Though not as famous, Richard Santulli is up there with the likes of the Wright Brothers and Igor Sikorsky for his contribution to aviation field. But unlike them, Richard didn’t make aircraft, he pioneered a new use for them.
As the driving force behind NetJets, a company he founded and led for a quarter of a century, Richard created not only the notion of fractional jet ownership but also proved it could be successful – even when everyone else said it couldn’t be done…
Early Life
Richard T. Santulli was born on August 14 1944 in Bensonhurst, Brooklyn, New York. The son of a civil servant, Richard developed a passion for horses at an early age, eventually learning to ride and spent his teenage years riding in Brooklyn’s Prospect Park.
An academically gifted student, particularly at Math, Richard enrolled at the Polytechnic University of New York (now the New York University Tandon School of Engineering), earning two MS degrees in the subject as well as a master’s degree in engineering.
He later became a Math professor and got married in 1966, flying for the first time when he went on his honeymoon. A son, Richard Jr., was born in 1967 but the marriage itself did not last, and Richard divorced his wife.
According to Richard, the birth of his son convinced him to search for a better paying job so he could afford his son the luxuries his parents couldn’t afford him when he was growing up.
This led to a two year stint at Shell Oil Co., where he worked as a number-cruncher. In 1969, his work at Shell had caught the attention of a Goldman Sachs executive, who wanted to start a group using computer modelling to mathematically analyze the deals Goldman was doing and make sure the numbers added up.
Interested in the idea, Richard joined Goldman as the head of its brand new quantitative analysis group. His worked continued to impress, and very soon, he became the President of Goldman Sachs Leasing, the company’s then-brand new aircraft and helicopter leasing division.
By 1979, Richard Santulli’s success at Goldman Sachs Leasing had brought him to the very cusp of being made partner, a position that would’ve boosted his social standing considerably, and paid significantly more.
RTS Capital Services
Fearing for the loss of the creative freedoms he’d enjoyed as a non-partner head of division, Richard resigned from Goldman and used his experience at Goldman to start his own leasing company in February 1980.
Called RTS Capital Services (with “RTS” being his initials), incorporated in New Jersey but based in New York, Richard shied away from financing fixed-wing aircraft deals as he understood that whilst more profitable, he could never stand toe-to-toe with the big banks: He simply didn’t have the money.
Instead, he focussed on helicopter leasing, and within only two years, had the largest helicopter fleet in the world, many of which were leased to offshore oil companies. That being said, he did finance the occasional fixed-wing aircraft deal.
Pioneering Fractional Ownership
In 1982, Richard Santulli became familiar with Executive Jet Aviation (also known as “EJA”), a perennially struggling charter and management company based in Columbus, Ohio.
Despite its constant struggle to stay afloat, Richard noticed something that everyone else seemingly missed: It’s potential. You see, though its finances were all over the place, EJA had meticulously kept a record of every flight it had ever done, including routes and flight manifests.
As the word’s leading lessor of helicopters, Richard was all too familiar with the dilemma of aircraft ownership:
Chartering was ineffective for companies who wanted to fly regularly, but aircraft spent 90% of their time in the hangar, not the sky. Plus, hiring and training crew, maintaining and insuring the aircraft was both a pain in the neck and expensive.
Having taken notice of the concept of timeshares for holiday homes, Richard theorized the same concept could be used for aircraft, thus allowing multiple people to own “shares” in an aircraft.
In 1984, Richard Santulli acquired Executive Jet Aviation as a subsidiary of RTS Capital Services and set about studying their flight logs to help create his formula. He also figured that the few jets leased out by RTS could join the fractional ownership program once their leases expired.
Called NetJets, this first-of-its-kind program was launched in 1987 with a fleet of eight Cessna Citation IIs, generating lots of press within the industry.
Some praised Richard Santulli’s intellect, whilst others openly mocked the idea of fractional ownership. After all, he wasn’t a pilot, he was just a former Goldman Sachs quant and math professor with some theory that may or may not work.
NetJets
Despite this, the infrastructure was in place. NetJets would sell the shares, whilst EJA would physically operate the aircraft, hire the staff and use Richard’s computer model for flight scheduling.
Safe to say, NetJets’ early years were a struggle. No matter how much Richard tried to assure potential clients that their jet would be available whenever they needed it, negative press surrounding fractional ownership put most of them off.
People simply weren’t willing to risk millions of dollars on a company whose philosophy was untested and that many “experts” denounced as a sham.
But then came the recession of the early 1990’s. Despite nearly bankrupting NetJets, the recession was actually a blessing in disguise.
Arguably the worst recession since the Great Depression (at the time), it had many corporate boards look at cutting down what it deemed as unnecessary spending. And corporate jets were at the top of most of their lists.
Even so, their executives still needed a way to fly on-demand, in the lap of luxury and in the appearance of owning their own jet. So many of the executives who’d scoffed at the idea of NetJets only a few years previously, now sat down with Richard to acquire a share in one of his jets.
Perhaps not surprisingly, NetJets expanded immensely. For each year of the 1990’s, NetJets added a record number of new customers and was placing orders for aircraft left, right and center, with the very manufacturers who’d laughed him out the room years previously.
1995 was a particularly year for both Richard Santulli and NetJets, as famed investor and CEO of Berkshire Hathaway, Warren Buffett, acquired a NetJets membership (for a Hawker 1000) to avoid the costs of jet ownership and being mobbed when he flew commercial.
This purchase in particular boosted NetJets’ credibility considerably: The Warren Buffett trusted the math so much, he’d betray his #1 principle – private jets were the “indefensible” – to get one.
Indeed, the credibility boost came with a flood of new membership requests. Even people in Europe began to get interested in acquiring a NetJets membership, prompting the establishment of a European subsidiary in 1996.
Berkshire Hathaway Takeover
In 1998, Goldman Sachs (who’d acquired a 20% stake in the company) began pressuring Richard to take the company public so they could make a healthy profit selling their stake in the company.
Uneasy with the idea of floating the company on the stock market as he knew investors wouldn’t have the appetite for the rapid fluctuations in the company’s balance sheet, leading to a volatile stock price. Something that wouldn’t be good for business.
Yet Goldman kept pressuring Richard to take the company public. So Richard reached out to Warren Buffett, who he’d met and befriended when the latter had acquired a NetJets membership, about acquiring the company instead.
Intrigued by the company’s rapid growth and near-monopoly on the industry (though this would soon change), Warren Buffett’s Berkshire Hathaway acquired the company in a deal valued at $725 million.
As a part of that deal, Richard Santulli remained as the company’s CEO and Chairman with almost total autonomy. Under Berkshire Hathaway ownership, EJA (formally renamed NetJets in 2002) continued to expand.
Berkshire ownership brought NetJets even more credibility to the company, as well as many more famous clients, chief among them being Microsoft founder and longtime CEO Bill Gates (who also happens to sit on the Berkshire Hathaway board).
Pretty soon, NetJets was the largest operator of private jets in the world, and was performing more than 10% of the world’s business jet flights (by comparison, its next largest competitor controlled a meager 3%).
Despite many of their corporate clients being in the tech and internet field, they were able to weather out the bursting of the Dot Com bubble in the early 2000’s with relative ease, by shifting the company’s outlook.
But as they say, all good things must come to an end. And that end came in 2009.
Aside from being the worst financial crisis since the Great Depression, the 2008/09 financial crisis (sometimes referred to as the Great Recession) threatened to bring down almost every aviation company in the world. NetJets was no different.
With most of its members on the brink of their own bankruptcies, most weren’t in the position to pay their monthly fees or book flights. And those flights that did get booked often incurred huge positioning fees that NetJets had to pay for.
In 2009, NetJets posted a $157 million loss. And whilst this can mostly be attributed to the business climate, rather than Richard Santulli’s leadership, a decision was made for new blood to take the reins of NetJets.
In August, Richard resigned as CEO and was replaced by longtime Berkshire Hathaway executive David L. Sokol, widely seen as Berkshire’s “Mr Fix-It” who oversaw the company’s posting of a $207 million profit in 2010.
Interestingly, prior to his departure from NetJets, Richard was touted as one of the people who might one day succeed Warren Buffett as Berkshire’s Chairman and CEO.
Milestone Aviation Group
But his departure from NetJets was not the end of his involvement with aviation. In August 2010, Richard announced he was establishing another helicopter leasing company, building on his years of experience leading RTS Capital Services.
Known as Milestone Aviation Group and incorporated in Ireland (for both technical and tax reasons), Richard Santulli aimed to “help operators access capital needed to improve their fleets in the wake of the Financial Crisis” as the company put it.
Under Richard’s leadership, Milestone Aviation Group closed deals with ASESA, CareFlite, Global Vectra Helicorp, Helijet International Inc., Omni Taxi Aereo, and Inaer. All in its first year of operation.
Within its third year of operations, Milestone held leases with three of the world’s four largest helicopter operators – Bristow, CHC and Inae – and had a fleet of over 40 helicopters made up of Eurocopters and Sikorskys (Bell helicopters being favored by RTS).
Richard Santulli also oversaw the company’s international expansion. Though incorporated in Ireland, the company long had an office in Columbus, Ohio office (where Richard himself is based) and soon opened new offices in Hong Kong, Singapore, Dubai and São Paulo.
By 2014, Milestone Aviation Group had a fleet of 168 helicopters worth an estimated $2.8 billion, leased by 31 operators in 25 countries. The company also had orders for a further $3 billion worth of helicopters.
The following year, in 2015, Milestone Aviation Group was sold to GE Capital Aviation Services (the aviation division of GE Capital) for $1.775 billion, marking the company’s first foray into helicopter leasing.
In turn, GECAS was sold to Irish-American aircraft leasing giant AerCap in November 2021.
Other Interests & Philanthropy
Aside from lending his gift for math to revolutionizing the business aviation industry, Richard has also lent it to the world of horseracing, combining his lifelong love of horses and math, making a fortune in the progress.
To begin with, Richard merely bet on horse races, allowing him to become a trustee of the New York Racing Association in 1983 and a member of the Breeders’ Cup board of directors.
He previously served as a steward of The Jockey Club from March 2000 until July 2021 and has been on the board of directors since January 2000.
From this, he was able to acquire the Jayeff B Stables with George Prussin in 2007 and become its general manager. Using his math background, he has been able to breed a number of successful racehorses and has netted over $10 million in winnings to date!
His other hobbies include playing golf (according to an interview he did in 2008, he has a 15 handicap), playing poker and spending time with his family.
As with many wealthy and successful businessmen – indeed his net worth is estimated at between $900 million and $1.1 billion as of the time of writing – Richard Santulli has also become a philanthropist, wanting to give back to the community.
To that end, Richard has served as the chairman of the Intrepid Fallen Heroes Fund since December 2014 and a director of Mercy Home for Children, a charity focusing on helping individuals with developmental disabilities.
He also serves as a director of the Andre Agassi Foundation for Education, whose stated aim is to improve education for children in areas where access to education is more difficult, or not up to standard.
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Featured image courtesy of Fort Belvoir Community Hospital via Flickr.