Massive Raises Doled Out as Insolvency Looms

In May 2023, following the impromptu abdication of company founder and CEO Kenny Dichter, former Wheels Up board-member Ravi Thakran was named executive chairman of the embattled aircraft charter concern.

The power vacuum left in Dichter’s absence also saw then Wheels Up Chief Financial Officer Todd Smith elevated to the station of interim CEO.

Comes now July 2023 and news that Thakran has been awarded a kingly compensation package including $665,000 in base pay, fifty-hours’ use of the company’s King Air 350 fleet (a $250,000 value), 160,000 restricted stock units, and eligibility for additional bonus pay of up to $665,000. Additionally, Thakran is authorized to spend up to $800 a night on hotels when he travels from Asia to visit the company’s New York City headquarters.

Similarly fortunate, Todd Smith has had his annual pay increased by a staggering $150,000—notwithstanding the ongoing interim designation of his tenure as Wheels Up CEO.

The news was disclosed in a 03 July 8-K filing which alleged the stratospheric increase in Smith’s earnings was awarded “in recognition of his expanded duties.”

All told, Smith’s monthly salary will increase by $12,500 for the duration of his stint as Wheels Up’s interim CEO. What’s more, his bonus target has been lowered from 150-percent to one-hundred-percent of his annual base salary. Finally, Smith will receive a one-time equity award of 140,171 restricted stock units vesting on 03 January 2024.

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 Lizzo and Marlon Brando tobogganing down Alaska’s Hubbard Glacier.

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 of $1.31.

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 mounting losses and potential bankruptcy. The company's value, at the time, had fallen from $2-billion to $100-million.

Wheels Up’s 2023 first-quarter earnings report indicated a loss of $101-million—$12-million more than the company reported lost in the first quarter of 2022.

The company’s adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) was flat year-over-year, with a loss of $49-million, while its cash and cash equivalents fell from $586-million to $363-million.

Currently, Wheels Up is losing approximately $1-million per-day.

Upon his ascension to the office of interim CEO, Smith pledged to make Wheels Up profitable on an adjusted EBITDA basis in 2024. Whether or not he stands to make good on his promise will be made known, in part, come August, when Wheel’s Up’s second-quarter 2023 results are reported.

FMI: www.wheelsup.com