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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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.

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Jet.Ai listed by merging with Oxbridge Acquisition Corp, a Special Purpose Acquisition Company (SPAC) becoming the second business jet services company listed in New York. A few blocks across Manhattan, Wheels Up and its advisers – investment bank Jefferies and law firm Kirkland & Ellis – were busy trying to secure the future of the first. Last Wednesday they announced a deal that brings in $500m of debt for 95% of the company.

Wheels Up’s listing in 2021 gave its large institutional investors a chance to free up their investments. Jet.AI’s gave its crowd funders a chance to do the same thing. “The driving force behind the SPAC deal was to bring liquidity to our 32,000 investors and to allow the company enhanced access to capital for growth,” says Winston.

Jet.Ai is more of a software company than a business jet operator. It has a fleet of four HondaJets and also has five Challenger 3500s on order. Winston says it uses these to inform its software business. It tries not to own the aircraft by selling fractional shares and they are all operated by Las Vegas operator Cirrus Aviation.

It definitely has some innovative technology. A few weeks ago, it soft-launched CharterGPT, which allows customers to book charter using artificial intelligence. It also has a new product to help operators off-set carbon emissions and one that automatically prices yields for diverting empty legs.

With Flight Club it wants to allow operators to sell shared flights. “The software sends the booking and files to the DOT [Department of Transportation] automatically and then you have to set up an escrow which we help with. Once you have done that you can sell by the seat,” says Winston. Jet.AI has already used this working with Cirrus Aviation and the Vegas Golden Knights ice hockey team. It is also planning to offer technology allowing small operators to create their own jet cards.

Unlike Wheels Up, Winston does not want to buy operators and consolidate business aviation. He wants to help the 2,350 Part 135 charter operators in the US use technology to become more efficient. Especially the 80% who have fewer than 10 aircraft. The listing is about raising money to fund this technology. The merger between Jet.AI and the SPAC was originally valued at $45m, but Jet.AI’s first week has been tough. It listed at $10 a share. They were trading at $4 before the market opened today.

Wheels Up also listed at $10. Despite its ticker symbol of UP, on Friday it was $1.45. This is up $0.45 after Delta Air Lines and a fund run by Certares and Knighthead agreed to lend $500m to Wheels Up. Wheels Up will issue new stock to the three giving them 95% of the company. The CK Opportunities Fund 1 will lend $400m, with Delta providing a $100m loan.

The investors hope that this $500m – and the $151m in cash it had at the end of June – will be enough to get it to 2024 when it hopes to be cash flow positive – and have a positive adjusted EBITDA.

The three investors are happy with these projections. Certares focuses on investing in travel and hospitality and Knighthead has a strong restructuring focus. Together they took car hire firm Hertz Global Holdings out of bankruptcy in 2021.

Delta and Ed Bastian, its highly regarded CEO, are committed to Wheels Up. They already owned 20% after merging Delta Private Jets with the company in 2020. Bastian believes that in the long-term Delta will have a big advantage in being able to sell private aviation to its customers. This is not a new theory for the airline. It launched Delta AirElite in 1984 and expanded this in 2010 when it acquired Seagrave Aviation from Jim Seagrave. (He is working on taking flyExclusive, his next company, public). Bastian believes Wheels Up is the best way for his airline to access business aviation.

“The partnership will create new opportunities for Wheels Up to drive strategic, operational and financial improvements for its customers in the months and years ahead,” said Bastian this week. “Delta’s unmatched expertise in premium travel, customer loyalty, corporate sales, operational reliability and aircraft maintenance, combined with Certares’ and Knighthead’s experience and global reach, are expected to speed Wheels Up on its path to profitability.”

Dan Janki, Delta’s CFO, has been appointed chair of Wheels Up.

Bastian is also a huge supporter of Kenny Dichter, Wheels Up’s founder, who stepped down as CEO in May but is still a strategic adviser to the company. “I would like to extend my sincere gratitude to Kenny Dichter, the visionary founder behind Wheels Up, for building the Wheels Up brand into a powerhouse in private aviation,” said Bastian this week. You could easily see Dichter coming back to Wheels Up with a more formal role – especially when growth becomes the focus again.

If Bastian’s bets are right: that Delta, Certares and Knighthead can get the company to profit by the end of next year and drive profits at his airline, you can expect to see other major carriers invest in business aviation. He will have secured his legacy as one of the greatest airline CEOs ever.

The bell for round two in Wheels Up’s stockmarket history has just rung.

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Certares and Knighthead are providing $400m with Delta using its previously announced $100m revolving credit facility. The private equity investors took Hertz Global Holdings out of bankruptcy in 2021.

Under the non-binding agreement, Delta will provide Wheels Up with $150m in new money term loans and a $100m revolving credit facility noted above. An additional $150m term loan will be provided by CK Opportunities under that facility. As will a further $50m in term loans from other investors. The additional $50m will be allocated as and when approved by Delta, Certares and Knighthead.

Wheels Up was advised by Jefferies and Kirkland & Ellis.

The company released financial results earlier today.

Wheels Up had an enterprise valuation of $2.1bn when it announced its merger with the Aspirational Consumer Lifestyle II SPAC in February 2021. It listed with a $10 share price in July 2021. Its shares closed at $1.33 yesterday.

Today Wheels Up announced that its second quarter revenue fell by $90m to $335m. The company’s net loss increased by $161m but $70m of this was a non-cash impairment. Wheels Up made a loss of $40m in the quarter.

“We are continuing to engage with strategic and financial partners around the path forward and look forward to sharing more information in the days ahead,” said Todd Smith, chief financial officer and interim CEO. “Meanwhile, we are continuing to provide exceptional service and experiences to our customers, who are reaping the benefits of our continued focus on operations.”

It had $151m of cash at cash equivalents on June 30th.

“The actions we have taken to improve our operations are translating to a better experience for our customers and an improved financial performance for the company,” said Smith. “Our on-time performance and reliability are showing marked improvement while our Adjusted Contribution margin and Adjusted EBITDA are at the best levels in almost two years, reflecting our focus on our network strengths as well as significant cost reductions and process improvements. We still have more work to do, but I am extremely encouraged by this quarter’s performance.”

Ed Bastian, Delta CEO said: “The partnership will create new opportunities for Wheels Up to drive strategic, operational and financial improvements for its customers in the months and years ahead. Delta’s unmatched expertise in premium travel, customer loyalty, corporate sales, operational reliability and aircraft maintenance, combined with Certares’ and Knighthead’s experience and global reach, are expected to speed Wheels Up on its path to profitability.

“I would like to extend my sincere gratitude to Kenny Dichter,” Bastian added. “For building the Wheels Up brand into a powerhouse in private aviation. We have great 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. We’re grateful he will continue as Wheels Up’s strategic advisor.”

Greg O’Hara, founder and senior MD, Certares, said the partnership with Wheels Up is a “natural extension” of its focus and experience in travel and tourism. “This transaction extends upon our longtime partnership with Delta across many of our portfolio companies.  We’re looking forward to joining Delta, Knighthead and others in driving the company’s ongoing transformation as it elevates private aviation as an industry leader,” said O’Hara. 

Wheels Up also revealed today that Delta chief financial officer Dan Janki will join the board as chairman. 

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“We are seeing no signs of demand falling,” said Robert Bourrier, EVP global corporate sales, Wheels Up. “Demand from corporates is stronger than ever.”

Bourrier joined Wheels Up when it acquired Delta Private Jets in 2020. Before that he worked in corporate sales at Delta Air Lines. Delta Private Jets had a corporate scheme which Wheels Up adapted and formally launched two years ago.

In April, Wheels Up announced a closer partnership with 20% shareholder Delta Air Lines to add even more enterprise accounts. “We’re focusing on very strategically targeting those opportunities and bringing new opportunities to Wheels Up from the Delta relationship,” said Bourrier.

Wheels Up customers can use their funds to buy Delta flights. Delta customers can also buy Wheels Up flights.

“It makes perfect sense, there is an awful lot we can do together,” said Ed Bastian, CEO, Delta Air Lines speaking at The Wings Club Luncheon in New York on May 17th. “We have just launched a partnership with our corporate sales team where our corporates who may not be willing to put a big investment into private aviation or may have their own – can on a smaller, almost by the menu option – take Wheels Up opportunities and we can make that as frictionless and seamless in our corporate customer contracts.”

 Bastian said that most corporate travel managers buy a lot of airline seats but few regularly get involved in business aircraft charter – which may be handled by corporate flight departments. He said this is a big opportunity for Delta and Wheels Up.

“What we do is sit down with customers to truly understand their needs,” said Bourrier. “We then develop a programme that suits that flying need and really solves the problems that they’re looking to solve.”

Bourrier gave the example of a company flying from New York on a capital raising roadshow. “They might fly from New York to Boston in a light jet. From Boston they might want to pick up another four people and then take a mid-sized jet down to Miami before choosing a bigger aircraft or Delta to fly to the Bay Area,” he said. “We can give them the flexibility to gain access to multiple aircraft on the same day and with unlimited lead passengers so they can put anyone they need on that jet at any time.”

Large users typically sign a two-year agreement depositing one year’s funds with Wheels Up. “Once they realise the advantages, the majority end up under contributing and fly in excess of the initial deposit,” said Bourrier.

He said they are always keen to introduce customers to business aviation. “So if a target organisation has a board meeting that’s upcoming, we are very happy to help them sample Wheels Up,” he said. “Once we get to know them and they know us we can transition them to a broader programme. And then somewhere we get to know them, they get to know us and then transitioning through a broader programme to meet all of it.”

It is not unusual for enterprise accounts to have their own aircraft. “We don’t want to compete with corporate flight departments. What we’re looking to do is be as complementary as possible,” said Bourrier. “When you already have your own fleet, we can be an extension of our fleet when you have challenges around maintenance or demand issues.”

The best part of the job for him is that every client – and agreement – is different. “We may have a customer that owns grocery stores across America with a very active CEO who wants to be in those locations probably once every year. We can get him to three stores a day.” said Bourrier. “It is exciting to be able to do this.”

Wheels Up also uses Air Partner – the brokerage it bought in 2022 – to arrange international trips.  Bourrier gave s the example of a company using Delta to fly long-haul to Europe and then using a business jet when they are here. “No one in the industry can do that and execute on it.”

Delta’s Bastian agreed. At the Wings Club lunch Bastian was asked by Phil LeBeau, CNBC’s auto and airline industry reporter, if he regretted investing in Wheels Up? Bastian answered: “Not at all. I won’t talk about the stock, and they are not unlike many SPACs. People talk about trouble with it tends to be more stock related. The relationship is strong. Kenny [Dichter] has done a masterful job over the last decade building a high-quality brand, great experience, a lot of new members.”

Bastian added: “For us to be able to add that to our stack as 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.”

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