In the year before Berkshire bought it (at the end of 1996) for $1.5bn FlightSafety International produced $111m in pre-tax earnings. Buffett was right in thinking that its strong market position would lead to a significant rise in profits. By 2007 pre-tax earnings were $270m. At this time the company could have been sold on to someone else at much more than Berkshire paid.
But Buffett had made a solemn commitment to Ueltschi and his staff that Berkshire would never sell. Also, a sale wouldn’t make sense when the economic franchise was even stronger in 2007 than it was in 1996, and the managers even better.
Pre-tax profits over the first thirteen years of ownership amounted to about $2.5bn. By 2009 annual profits were over $300m and rising. Berkshire gained another $3.5bn or so of pre-tax profits over the next decade. Even after tax is deducted that is over 150% of what was paid for the company in that decade alone. And still Berkshire gets to own it, receiving, year-in-year out, the hundreds of millions of dollars of cash it generates.
In terms of managing the business, Ueltschi said that nothing changed after 1996, and that is just the way he wanted it. He said “Warren Buffett…he’s not the type of guy that would try to break something up. Some of these big companies, they buy the company then there is big stuff they want to change: they put their name on it, they want to change everything. All the people that worked there for years, that built this thing up – and they’re in there because it’s their life’s blood and they believe it – they lose all their enthusiasm because there’s somebody from the big office comes in and tells them how to run it. And these people know how to run it. I’ve got some of the finest people in the world working at FlightSafety and they all are dedicated, they’re loyal, respectful and they’re honest and the do everything to take care of the customer.” (Al Ueltschi in an interview with Robert P. Miles (2002) The Warren Buffett CEO)
Buffett once asked a group of Columbia University students, “do you think Al Ueltschi, who owns $1 billion in Berkshire stock, is going to want to keep running his business if I’m over his shoulder making decisions?”
There were other benefits for Ueltschi in being part of the Berkshire fold, including avoiding Wall Street analysts constantly asking how much money FlightSafety was were going to make next quarter and why it didn’t make more last quarter. “Now we run the company for the long term without worrying about the next quarter. That’s one of the best things about working with Warren.”
Ueltschi pointed to Buffett’s amazing leadership ability, saying the letters of the word represent the qualities he possesses:
L is for loyalty
E for enthusiasm
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