Wheels Ups and Downs

Wheels Up has reportedly retained attorneys specializing in corporate restructuring.

In a statement ostensibly pertaining to the move, the company set forth: “Wheels Up continues to progress with redesigned programs to better serve its members and customers in support of our path to profitability. As we execute our vision and the associated strategic plans, we are working with a number of advisors and industry participants around securing new strategic investments, raising capital, and executing previously disclosed strategic divestitures,”

Wheels Up stock opened at $3.13-per-share on 22 June. After falling as low as $1.10, the stock closed the day at $1.24-per-share.

In early-June, the company completed a reverse stock-split, raising its per-share price above $1.00 to avoid being delisted by the New York Stock Exchange.

Founded in 2013 by Kenny Dichter, Wheels Up is a New York City-based provider of on-demand aircraft services. The company is among the world’s largest private aviation concerns and functions by dint of a membership/on-demand business model which allows members to book private aircraft via a mobile application.

On 14 July 2021, Wheels Up became the first private aviation concern to be listed on the New York Stock Exchange.

The company’s fleet comprises King Air 350i, Citation Excel/XLS, Citation X, Citation Encore+, Citation CJ3, Hawker 400XP, Falcon 2000, Challenger 604, Gulfstream GIV-SP, and Gulfstream G450 aircraft. Members may book private flights operated by either Wheels Up’s fleet of aircraft owned and operated by third-party certificate holders.

Between 2014 and 2021, Wheels up sold thousands of private and company memberships, purchased hundreds of aircraft, sponsored a Triple Crown-winning racehorse, and acquired numerous air carriers the likes of TMC Jets, Delta Private Jets, Mountain Aviation, and Air Partner PLC, as well as travel management companies such as Avianis and Gama Aviation—in so doing becoming the U.S.’s second-largest private aircraft operator behind only NetJets.

Regrettably, the company’s trajectory proved unsustainable, changing thereafter from one of perpetual ascent to that of a spacecraft full of overweight pigs falling toward a high-gravity planet.

In 2022, Wheels Up racked up a staggering $555-million loss against revenues of $1.58-billion. Dragged downward by spooked investors, the company’s stock fell from its initial 2021 offering price of $10-per-share to its current, less-than-stellar value.

By the end of 2022, after mortgaging its aircraft fleet, Wheels Up amassed cash reserves of $585-million. By March 2023, however, those reserves had shrunk to $363-million. At the time, the company’s members numbered some 12,000.

On 09 May 2023, Wheels Up founder and CEO, Kenny Dichter resigned in the face of his company’s mounting losses and potential bankruptcy. Board member Ravi Thakran was subsequently named Wheels Up’s executive chairman and Chief Financial Officer Todd Smith was elevated to the station of interim CEO. The company's value, at that time, had fallen from $2-billion to $100-million. Wheels Up’s 2023 first-quarter earnings report indicated a Q1 loss of $101-million—$12-million more than the company reported lost in the first quarter of 2022.

Dichter's departure arrangements—as revealed by a 09 May 2023 Securities and Exchange Commission Form 8-K filing—include a $3-million lump-sum payment and a two-year continuation of his $950,000 annual salary. In addition, Dichter will be paid a prorated annual bonus based on the duration of his tenure with Wheel’s Up, continue to receive company health insurance coverage, and enjoy a yearly travel allowance of two-hundred hours aboard company aircraft. What’s more, Dichter is to remain a director on the Wheels Up board.

On 10 May, Wheels Up issued a statement that it was not considering bankruptcy.

Notwithstanding its precarious position, Wheels Up has gleaned a degree of verbal backing from Delta Air Lines—the company’s largest shareholder.

Speaking at New York’s Wings Club on 17 May, Delta CEO Ed Bastian voiced support for Wheels Up, stating of his company’s relationship with the imperiled concern: “It’s paying up in meaningful ways. First of all, people put their money on Wheels Up. They can use that same money on Delta in terms of the block sales. If you think the places Wheels Up has strength in places, we may not have natural strength in.”

In its 2023 Q1 earnings call, Wheels Up announced a partnership with Delta by which the legacy airline’s corporate customers were to be targeted to purchase private flights aboard Wheels Up aircraft.

Wheels Up CFO and interim CEO Todd Smith stated on the call: “Delta has a terrific business with a number of corporates in terms of commercial travel. Now we’re able to also offer those same customers the opportunity to access Wheels Up. And I think that combination is something that’s really unique in the market, gives their teams the competitive advantage and hopefully leads to more growth in the area that we’re really targeting, which is expanding our own corporate business.”

Speaking at the Jefferies Business Aviation Conference on 13 June, Smith advised attendees liquidity wasn’t among his concerns, stating Wheels Up had “more options. … If we … get to the point where we need to raise funds if needed.”

Consistent with Smith’s insinuation, Wheels up has announced plans to raise capital by selling off its non-core businesses. Moreover, to reduce loss-inducing empty legs the company has launched a new King Air program east of the Mississippi River.

Considered through the lens of an adjusted Earnings Before Interest, Taxes, Depreciation, and amortization (EBITDA), Wheels Up lost $185-million in 2022. The company projects 2023 will see losses drop to $110-to-$130-million.

In the event Wheels Up’s last-ditch efforts prove futile, the divestment of the company’s sizable fleet stands to occasion industry-wide repercussions. The influx of hundreds of low-time, primarily Textron Aviation business jets and turboprops into the pre-owned aircraft market would not only severely diminish sales of new Cessna and Beechcraft aircraft, but drive down the residual and resale values of subject planes as supplies of such exceed demand—thereby hamstringing aircraft owners, lenders, and lessors alike.

FMI: www.wheelsup.com