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Buffett's Baby Is Taking a Bumpy Ride

June 24, 2006

Mr. Buffett has had a longstanding and successful penchant for buying companies run by skilled, passionate managers who can exercise nearly monopolistic control over prices in their markets. Although NetJets is by far the leader in its industry, the company lost $80 million last year, after scratching out a profit of $10 million in 2004. (It also lost money in 2001, 2002 and 2003, according to the company.)

Mr. Buffett declined to be interviewed, but he noted in his most recent letter to Berkshire Hathaway shareholders that while he had thought that NetJets would be profitable last year, he had been "dead wrong." Mr. Santulli, the chairman and chief executive of NetJets, who agreed to telephone interviews, had a more colorful observation of his company's problems in 2005 — induced, he said, by haggling over a new pilots' contract, increasing and budget-busting demands on its domestic fleet, and a number of continuing problems in its efforts to build a European presence:

"It was horrible, horrible," Mr. Santulli said. "I was embarrassed."

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