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Sat, May 27, 2023

Wheels Up Landing

Portrait of a Parabola

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.

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, changing thereafter from one of perpetual ascent to that of an overfed boar-hog dropped from a U-2 on a high-density altitude summer afternoon.

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, 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 will likely last only through the end of summer, Wheels Up is currently endeavoring 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 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.

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.

As a rising tide lifts all ships, so a receding tide reveals who’s been swimming naked.

FMI: www.wheelsup.com


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