Delta Air Lines Cash Infusion to Sustain Wheels Up—For Now

Notwithstanding tremendous early success—to include earning the distinction of being the first private aviation company to be publicly traded on the New York Stock Exchange—Wheels Up, since 202, has fallen precipitously into debt and twice drawn perilously near bankruptcy.

Wheels Up has forestalled release of its 2023 second-quarter earnings, supplanting the customary disclosure with an announcement that Delta Air Lines, which owns twenty-percent of the company—is making a further, short-term capital investment in the embattled New York City-based provider of on-demand aircraft services.

In an August 2023 statement, Wheels Up set forth: “Wheels Up Experience Inc. is actively involved in discussions around strategic business partnerships for the company and today announced that Delta Air Lines has provided a short-term capital infusion to the company.”

After accumulating sizable losses and burning through its cash-reserves, Wheels Up executives vowed in June 2023 to dispose of the company’s non-core assets.

In a May 2023 speech, Delta Air Lines CEO Ed Bastain remarked: The relationship is strong. I think [Wheels Up board member nee founder] Kenny [Dichter] has done a masterful job over the last decade building a high-quality brand, great experience, [with] a lot of new members, and for us to be able to add that to our stack is the premium opportunity within the Delta experience, well no one has ever been able to do that before, and we have been attempting to pull that off.”

On 09 August, Wheels Up disclosed: “On 08 August 2023, the Company [Wheels Up] entered into a short-term capital infusion in the form of a secured promissory note with Delta Air Lines, Inc. These efforts have involved significant resources and have been a priority for management, thereby diverting significant management time and internal resources from the Company’s processes to review and complete its financial statements and related disclosures in a manner that would permit a timely filing of the Form 10-Q. For this reason, the Company will be unable, without unreasonable effort or expense, to complete and file the Form 10-Q within the prescribed time period. The potential investments and/or capital raise described above are subject to market and other conditions that are not within the Company’s control. Absent the ability of the Company to obtain this additional funding in the near-term, the Company has concluded that there is substantial doubt about its ability to continue as a going concern for any meaningful period of time after the filing of this Form 12b-25. The Company is endeavoring to complete its financial close process and file its Form 10-Q on or before Monday, 14 August 2023, which is within the five calendar day extension provided by Rule 12b-25.”

Founded in 2013 by Kenny Dichter, Wheels Up 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.

Wheels Up’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.

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

Regrettably, the company’s trajectory proved unsustainable.

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 an abysmal 28-cents. The precipitousness of the plunge compelled Wheels Up’s management to propose a reverse split by the company would be spared the indignity of having its stock delisted by the New York Stock Exchange.

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. Acutely aware of the distressing fact its war-chest would likely last only through the end of summer, Wheels Up endeavored to optimize the efficiency and profitability of its operations while considering the sale of non-core assets.

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, also released 09 May, 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 is to 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.

In early August 2023, an aviation industry insider likened Wheels Up to a Ponzi scheme, alleging federal regulators will presently undertake an investigation of Wheels Up for purpose of determining whether the company’s senior leadership perpetrated fraud in taking the company public.

“Wheels Up is over,” the individual asserted, adding: “Civil action will commence as class action attorneys smell blood in the water.”

“How did this go on for so long?” the insider challenged; “Endorsements, Wheels Up gave away millions in free or discounted memberships in exchange for endorsements: professional athletes, actors, newscasters … it’s even rumored Jim Cramer of CNBC received a free or deeply-discounted membership to say he felt Wheels Up was a buy during a Lightning Round in September 2021.” 

The allegations against Wheels Up concluded: If you're looking to jump onboard a class action lawsuit, you'll soon not need to look far. Once the smoke clears and they're long gone, how will Wheels Up be remembered? [as] A Ponzi scheme, wrapped up in a marketing company, run by a pitch-man.”

FMI: www.wheelsup.com