The private aviation company saw an 8% increase in flight service revenue to $163.6m, offset by declines in other areas such as membership and aircraft management.

“Since the strategic investment, we have made strong progress on a number of key fronts. Revenues have stabilised after a long period of time as we continue to make changes across the board,” said George Mattson, the company’s CEO while talking to Corporate Jet Investor.

CEO George Mattson emphasised the company’s focus on rebuilding sales and improving overall performance.

“We made significant progress over the past quarter to improve our business for a sustainable future,” said Todd Smith, Wheels Up CFO.

“We are continuing to optimise our cost structure and fleet to focus on profitability. With improving liquidity in the fourth quarter and our partnership with Delta, we believe we are well positioned to continue to invest in our business for the long term.”

Operational losses narrowed from $82.6m in Q1 to $79m in Q2, driven by belt tightening in the form of reduced general and administrative expenses. The company’s contribution margin also improved significantly, reaching 7.8% compared to 1% in the previous quarter.

Wheels Up’s cash burn decreased substantially to $27m in Q2 from $73.8m in Q1, with cash reserves standing at $141m as of June 30.

The company expressed confidence in its ability to invest in future growth, supported by improved liquidity and its partnership with Delta.

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Brian Foley, the well-respected business aviation consultant, this week published a piece saying that Wheels Up needs to speed up getting to a profit to help Delta Air Lines, its largest investor. Delta’s profit fell 29% in the last quarter (it was not the only airline having a disappointing six months) and Foley says that Wheels Up needs to change quickly.

But, on paper at least, Delta’s investment in Wheels Up has not been a disaster. It is one of the few early investors who can say this. 

The airline was given 21% of Wheels Up in return for merging its business jet subsidiary Delta Private Jets with the membership company in 2020. In December 2022, according to its quarterly reports, Delta valued its stake at $257m. At the end of June 2023, when Wheels Up looked like it could file for bankruptcy protection, Delta cut this to $6m.

You know what happened next. In return for 95% of the company Delta, Certares, Knighthead and Cox lent the company $350m in September 2023. Delta also arranged an extra $100m loan. Before they invested, Wheels Up’s market capitalisation (number of shares multiplied by stock price) was just $69m.

This was a long way from when it went public in June 2021 at $2.83bn. On August 11, 2023 – when a Chapter 7 bankruptcy was possible – it hit $28.2m. Wheels Up’s market capitalisation today is $1.6bn.

On June 30 2024 Delta valued its 38% stake at $498m.

There are a few disclaimers here. Only 5% of the stock is still trading and if you were an early investor you are still very much in the red. But, so far at least, it has turned out to be a decent investment for Delta – especially compared to so many airline deals. It has been a fantastic one for Certares, Knighthead and Cox.

Like any financial investors, Certares, Knighthead and Cox are likely to want to exit one day. Delta is the obvious future buyer of their stakes. If Wheels Up does get to profit soon – and we will find out more next week – Ed Bastian, Delta’s CEO, may actually regret not buying more of the company in 2023.

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This week, when George Mattson (who has now been CEO for five months) announced the company’s first-quarter results, there was none of this excitement.

Sales were down 44% and it posted another loss, but this is not a surprise. The company is still restructuring. Mattson stressed that everything was in line with the plan.

“Wheels Up was great at the offensive, but its defence was weak,” says one member of its founding team looking back. “It was becoming the Amazon of business aviation but the warehouses and delivery team could not keep up.”

Much of the past year has been about building this defence. In an analyst call, Mattson and Todd Smith, Wheels Up’s chief financial officer, stressed how they are focusing on operations and turning around the company. They said that they have added more than 250 years of operational experience to its Atlanta Member Operation Center (we don’t know how many people this is). It had on-time performance of 87% and a flight completion rate of 98%. It is also cutting its fleet and cutting costs.

At $197m, sales for the first quarter were down 44% compared with last year. But half of this came from the sale of its aircraft management business to Airshare and lower aircraft sales (the company’s aircraft sales team have also since left). Charter – mainly run through Air Partner – was up 20%.

The number of active members fell by 25% to 9,155. Some of these were members in the centre of the US that Wheels Up no longer wants to serve with its King Air fleet (but it is very happy to arrange charter for them). Active users fell to 10,218, a 23% YoY drop from 13,336 users in the same quarter last year.

The results also show how long it can take to change a membership company. Wheels Up stopped selling its guaranteed nationwide programme in June 2023. So it still has customers on this programme – although it is now less than 20% of its peak.

Wheels Up is saying that it is on track to produce positive adjusted EBITDA by the end of the year. It had an adjusted EBITDA loss of $49m in the quarter; similar to the same quarter last year. 

The biggest change in the past 12 months is that it has added $490m in new investment – particularly the cash and support that has come from Delta Air Lines. At a members’ event at the Masters golf tournament, Ed Bastian, Delta’s CEO, stressed that the airline is committed to Wheels Up.

Mattson and Smith still have a way to go to get Wheels Up to profit. The company had a net loss of $487m for 2023 financial year, down from $555m in 2022. It got through $6,765m of cash last year. But they have a plan and will quietly keep working on it.

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The decrease in revenue was primarily driven by the exit from the aircraft management and aircraft sales businesses, as well as reduced membership and flight revenue.

Active Members decreased by 25%YoY to 9,155, a result of the regionalisation of member programs and a focus on profitable flying.

This member decline also led to a decrease in active users to 10,218, a 23%YoY drop from 13,336 users in the same period last year.

Live flight legs and total private jet flight transaction value decreased 24% and 26%, respectively to 11,754 and $191,763.

However, the total private jet flight transaction value per live flight leg remained relatively stable, decreasing only 3% year-over-year to $16,315 compared to $16,772 in the same period last year.

At the bottom line, Wheels Up’s net loss improved slightly year-over-year to $97.4m translating into loss per share of $0.14.

Despite the decline in revenue, Wheels Up highlighted strong operational performance, exceeding internal goals with a 98% completion rate and 87% on-time performance (D-60) for flights. The company also announced its plans to open a new flagship maintenance facility at Palm Beach International Airport (PBI) and the appointment of David Harvey as chief commercial officer.

“Wheels Up has made great strides to improve our operations and consistently deliver exceptional service and an experience worth repeating for our customers,” said George Mattson, Chief Executive Officer.

“Our strong operational performance provides the foundation for driving to profitable growth. I am pleased with the market interest in the accessibility and flexibility of our offerings, and we are seeing accelerating commercial momentum through our strategic partnership with Delta Air Lines.”

“Despite slower demand in January and February, we saw sequential improvement in March that is following through into the second quarter,” said Todd Smith, Chief Financial Officer.

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“We at Wheels Up are continuously evaluating and acting upon opportunities that will drive efficiencies and control costs, all in service of strengthening our business model and improving our member experience,” said George Mattson, CEO, Wheels Up.

The company said its new PBI facility signifies a shift in maintenance network strategy by strategically locating resources closer to areas with high flight density. The company aims to achieve better alignment with its overall network and flight patterns with the launch of new MRO.

“The opening of our new state-of-the-art maintenance facility at PBI is a key strategic step, leveraging our resources and locating our facilities in areas of high flight frequency.  As a result of these measures, we are improving reliability and efficiency while reducing costs as we continue to drive toward adjusted EBITDA profitability later this year,” added Mattson.

The company will initiate an immediate closure of its Colorado facilities. The relocation of personnel from the Fort Lauderdale location will occur upon the opening of the new Palm Beach facility.

To ensure a smooth transition for impacted employees, Wheels Up has collaborated with MRO providers FEAM Aero and AVEX Aviation in Cincinnati and Broomfield. The company said these partnerships will provide departing staff at Colorado sites with direct opportunities for placement within these established companies.

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Our feature Wheels on Fire probes the business restructuring of Wheels Up. No aviation business has attracted as much attention as Wheels Up this year. This cover story feature probes how and why the restructuring happened. Plus how the company is preparing for a profit-focused future.

Star players in the feature include: (of course) Kenny Dichter, founder, former CEO and chair. George Mattson, new CEO of Wheels Up and, the man who appointed him to the role, Ed Bastian, CEO, Delta Air Lines among many others.

Here’s a selection of quotes from our cover story feature. This from Dichter after his departure from the company: “I am very enthusiastic about the future of Wheels Up. The entire Wheels Up community has my unwavering support on the journey ahead.”

And here’s Bastion on Dichter’s contribution to the business. “I would like to extend my sincere gratitude to Kenny Dichter for building the Wheels Up brand into a powerhouse in private aviation,” he said after closing the big financing deal. “We have grate appreciation for his steadfast devotion to the members, customers and employees and his role in elevating the private aviation experience, which will undoubtedly guide the industry’s path forward.”  Read the full story here.

When Dassault Aviation’s executive vice president Civil Aviation, Carlos Brana spoke to CJIQ, he stressed the technical qualifications of the manufacturer’s staff. “Most of us are engineers – we are a company of engineers,” he told us. It’s a discipline and an approach to business planning that infuses all of Dassault Aviation, he said.

Brana is responsible for defining and implementing global strategy for Falcon Aircraft sales and customer service. His to-do list includes defining the guidelines for the modernisation of Dassault’s product line. So Brana and the team had something to celebrate last month when the manufacturer confirmed its long-awaited Falcon 6X had finally entered service after the jet won type certification from both EASA and FAA on August 22nd.

During our interview, Brana looked ahead to the commercial launch of the 6X and its next development project – the Falcon 10X, due to enter service at the end of 2025.

Another leading business jet to feature in the current edition of CJIQ was the ACJ TwoTwenty in our popular First Look feature. Launch customer luxury resort company FIVE Hotels is so pleased with its new jet it’s reluctant to release the aircraft to exhibit at events. Chadi Saade, acting president, Airbus Corporate Jets told us: “FIVE Hotels seems delighted with its ACJ TwoTwenty and aircraft schedule is so busy – to the point we can’t get hold of the aircraft  as much as we would like or shows.” But he added: “It’s a nice problem to have.”

Aloki Batra, CEO FIVE Hospitality told us: “A dare-to-be-different jet, the ACJ TwoTwenty cabin is one of the most innovative and technologically-advanced aircraft cabins ever designed. One that boasts all the conveniences of luxury living, but in the sky.”  

No stranger to fast jets was the late Hamish Harding, the late chairman of Action Aviation, who tragically died on June 18th, 2023, when his submersible imploded during a dive to view the wreck of RMS Titanic in the North Atlantic. Our feature recalls happier times, as we documented his many adventures in the air, in space and below the sea.

The first adventure we featured was his world-record breaking circumnavigation of the Earth via the North and South Poles at the controls of a Qatar Executive Gulfstream G650ER together with a specialist team. Last year Harding blasted into space aboard the Blue Origin New Shepard 4 space rocket.

The feature, Jules Verne planted the idea, recalled another record-breaking achievement, his dive aboard the Triton submersible DSV Limiting Factor to the deepest part of the world’s oceans. Accompanied by submarine explorer Victor Vescovo, Harding crossed the Challenger Deep in March 2021. Read the full feature – including his many other accomplishments – via the link.

Meanwhile, you can read the digital version of CJIQ here. And, if you like what you read, why not sign up for the free print version of the magazine?  Also, we are always searching for new stories from the fast-moving world of private jet aviation. So, if you have an idea, please let us know.

The post CJIQ323 features Wheels Up, Dassault, Airbus and the late Hamish Harding appeared first on Corporate Jet Investor.

He incorporated, the fractional jet and charter company, in January 2021. Two months later he ordered HondaJets. Volato took delivery of its first aircraft in August 2021. Last week the company went public on the NYSE American after less than 2.5 years of flying. He wanted to list the company to help Volato grow faster.

“We believe that this transaction provides not only the capital to accelerate our fleet growth and strategy, but also a level of transparency and institutional support that should make our product even more attractive to new fractional owners and private fliers,” said Liotta.

Volato has a fleet of 23 HondaJets and has 24 firm orders. This includes four Gulfstream G280s coming next year. It had sales of $96m in 2022 – helped by new fractional aircraft sales.

The company has three types of customers: fractional owners, jet card members and ad hoc charter customers. Volato has an innovative offering for its fractional owners – they can use the aircraft as much as they want, with special owner rates, or share in revenue from charter.

The company has bases in southern California, Georgia, Massachusetts, Texas and two in Florida. It acquired Gulf Star Aviation in March 2022 to establish itself in Houston and plans to copy this in other markets. Its next targets are Colorado, New York, Chicago, northern California and the Pacific Northwest.

After listing Volato announced a new partnership with Fly Alliance to give owners access to larger aircraft. It also launched a new partner benefits programme with companies including Spa company Canyon Ranch, concierge firm Quintessentially, Goss RV, Lacure Villas, online poker PokerGO; spirits supplier ReserveBar; Hertz and others. 

Volato follows Wheels Up and Jet Ai. The next business aviation operator set to be listed is flyExclusive, which has also moved its focus from charter to fractional. Its SPAC has delayed its shareholder meeting from December 5th to December 19th.

Liotta stresses that SPACs have moved on from the first wave. He always planned to float the company (it is the second company he has taken from launch to listing) and believes that transparency is good for business aviation.

At CJI Miami this year, Liotta stressed this. During a panel he commented on an answer made by George Mattson, CEO, Wheels Up the day before.

“He made a joke about having your financials exposed for everybody to look and I think that is a really good point,” said Liotta. “It is easy to beat up on people who have their financials transparently out there. The question is what about other people who don’t have theirs out there?”

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“As discussed on our earnings call last week, we expect our cash balance at the end of the year will be flat to up versus third quarter levels, reflecting a stabilization of deferred revenue and working capital, the absence of the one-time transaction costs, and proceeds received from the additional term loan,” said George Mattson, CEO, Wheels Up.

These new investors join Delta Air Lines, Certares Management LLC, Knighthead Capital Management LLC and Cox Enterprises under the existing Credit Agreement. Earlier this year in September, Wheels Up announced a cash infusion of $450m by Delta, Cox Enterprises, and CK Wheels.

Upon the closing of this new investment, the credit facility now consists of the $390m term loan and the revolving credit facility of $100m.

In connection with closing the additional term loan, Wheels Up completed the second issuance of shares of common stock to the lenders on November 15, 2023, such that the lenders now hold shares equal to approximately 95% of the company’s outstanding equity on a fully diluted basis as of September 15, 2023, after giving effect to such issuance.

In its third quarter results announced last week, the charter and jet-card provider’s sales fell $100m whereas the number of members also witnessed a decline of 15% with live flight legs down 21%.

Wheels Up’s revenue declined by $101m in the 1Q 2023 and $161m in the second quarter as the company undergoes a restructuring to improve profitability.

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The company’s key operating metrics saw a significant deterioration as active members, users, number of live flight legs and flight revenue per leg all witnessed a decline. According to the earnings release, Wheels Up’s active members as of September 30th decreased 15%YoY to 10,775, owing to the regionalization of member programs and a focus on more profitable flying.

Active users during the quarter also decreased 10%YoY to 11,988, while live flight legs decreased 21%YoY to 16,581. The company said the decline in live flight legs was attributable to “a slowdown in the industry and efforts to focus on profitable flying.” Revenue per flight leg inched down by 3%YoY to $12,945.

On the bottom line, the company posted a net loss of $144m during the quarter from $149m during the same period last year.

In the third quarter, the company spent around $250m to support operations. However, Wheels Up said that it has ample liquidity to support operations including $245m in cash, $100m in undrawn rollover and expected loan of $50m.

Wheels Up has been hit hard by financial woes and has been looking to raise new capital and divest some of its unprofitable business lines. It company recently secured a $450m capital infusion backed by Delta Air Lines, Certares Management, Knighthead Capital Management, and Cox Enterprises.

“The strategic investment from Delta Air Lines, along with our new partners, demonstrates their confidence in our operational and commercial plan to deliver a compelling and differentiated experience for our customers,” said George Mattson, CEO, Wheels Up.

Meanwhile, the company is in discussions with potential investors on the announced $50m term loan.

The company also introduced a new program called “Up for Business,” which offers a tailored private aviation solution for small and medium-sized enterprises (SMEs), jointly sold through Wheels Up and Delta sales organizations.

In October, the company divested its aircraft management business to Airshare.

Wheels Up’s financial performance in the third quarter was impacted by a number of factors, including the regionalization of member programs, a focus on more profitable flying, and a slowdown in the industry.

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George Mattson, the new Wheels Up head, plans to be based at the company’s Atlanta Operations Center, rather than the New York City offices. Todd Smith, who has been interim CEO since founder Kenny Dichter stepped down in May, will return to his role of chief financial officer (CFO).  

With Delta investing more in Wheels Up (it has already lent $60m before the restructuring programme is agreed upon) it is no surprise that Mattson, a former Goldman Sachs banker, has a strong connection with the airline. He has been on the board of Delta Air Lines since 2012 and knows Delta CEO Ed Bastian well.  

“George is an exceptional business leader whose background will be instrumental to the continued success of Wheels Up,” said Bastian. “With new leadership in place, Wheels Up is well-positioned to drive strategic, operational and financial improvements for its customers and stakeholders in the months and years ahead.” 

Mattson should understand Wheels Up well. He was on Delta’s board when it agreed to merge with Delta Private Jets in 2019 (in return for a 27% stake). He is also the chair and largest investor in Tropic Ocean Airways, a seaplane operator. Wheels Up invested in Tropic Ocean Airways in March 2022 as part of a partnership agreement.   

“George is an exceptional choice to lead the company through this important time.  He will serve customers, employees, and stakeholders consistent with the elevated experiences that have always defined Wheels Up,” said Dichter. “I am very enthusiastic about the future of Wheels Up.” 

Wheels Up says that Mattson has 25 years of aviation experience – it says that he oversaw transportation and airlines when he was co-head of the Global Industrials Group. Mattson also led two SPACS. One merged with Virgin Orbit, a small satellite launch company, which filed for Chapter 11 this year. The other acquired electric trucking company Xos. 

He is due to start working for Wheels Up in early October. His decision to be based in Atlanta is significant. Wheels Up opened the 34,000sqft Member Operations Center earlier this year. It has been led by Dave Holtz, chairman of Operations at Wheels Up, who spent 43 years at Delta.  

Flexjet last week opened its $50m stunning new headquarter global operations centre (pictured) in Cleveland. The 51,453sqft it adds brings Flexjet’s Cleveland campus to 243,000sqft.  

The star shaped building hosted more than 1,200 guests and even had a static display of all the operator’s aircraft. The senior manufacturers in attendance are also a sign that you can expect at least one order from Flexjet at NBAA BACE. 

Inside the star-shaped building, Flexjet has installed the largest seamless LED screen in the US. It is 176ft (53.6m) wide by 19ft high with 1,572 individual panels. Although it would be great for playing video games, the screen displays every Flexjet, Sentient Jet, and FXAir flight around the world in real time. 

“If anyone sets foot into the Global Headquarters, they instantly realise how serious we are about building a global company,” says Andrew Collins, co-CEO, Flexjet. 

“I was over in Europe when everyone started moving in and I was blown away when I came back. It is beyond expectation. It has injected so much energy into the company,” says Collins. “You can tell, as soon as you walk in, that it has also been designed from a workflow standpoint to absolutely service a customised product set.” 

Flexjet now employs more than 4,000 people around the world. Some 670 of them are based in Cleveland. Ricci, its founder, is also passionate about design and architecture. In the control room there is a table made from the fuselage of the first Gulfstream G4. Coincidently, Ricci has flown the aircraft.

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