March 2008 Archives

Mike Gleason, now an engineer with FlightSafety Simulation, has set up a website with photos, phone lists, and newsletters from Burtek, the flight simulation company founded in the '40s by the merger of Technical Training Inc. and Burton-Rogers, then purchased in the late '70s by the French defense conglomerate Thomson-CSF, forerunner of Thales. Most of Mike's material is from the late '80s and early '90s.

This might be my favorite photo: Nita Winters from accounting dressed as a clown and wearing the same colors as the "clown-colored" cubicle partitions in the engineering area.

Mike would like more old Burtek stuff to post -- you can reach him at gleason.ok@cox.net

Some kind words about Berkshire Hathaway subsidiary FlightSafety, in BH chairman Warren Buffett's 2007 letter to investors (see page 7 of linked PDF):

One example of good, but far from sensational, business economics is our own FlightSafety. This company delivers benefits to its customers that are the equal of those delivered by any business that I know of. It also possesses a durable competitive advantage: Going to any other flight-training provider than the best is like taking the low bid on a surgical procedure.

Nevertheless, this business requires a significant reinvestment of earnings if it is to grow. When we purchased FlightSafety in 1996, its pre-tax operating earnings were $111 million, and its net investment in fixed assets was $570 million. Since our purchase, depreciation charges have totaled $923 million. But capital expenditures have totaled $1.635 billion, most of that for simulators to match the new airplane models that are constantly being introduced. (A simulator can cost us more than $12 million, and we have 273 of them.) Our fixed assets, after depreciation, now amount to $1.079 billion. Pre-tax operating earnings in 2007 were $270 million, a gain of $159 million since 1996. That gain gave us a good, but far from See's-like, return on our incremental investment of $509 million.

Consequently, if measured only by economic returns, FlightSafety is an excellent but not extraordinary business. Its put-up-more-to-earn-more experience is that faced by most corporations. For example, our large investment in regulated utilities falls squarely in this category. We will earn considerably more money in this business ten years from now, but we will invest many billions to make it.