Wheels Up’s sales rise and losses grow, as president role cut

news

by CJI Expert

November 14, 2022

Wheels Up grew its membership in the first nine months of the year but made a loss of $86.8m. It has also scrapped the role of president to “flatten” its company structure and speed up decision making. Revenue increased 39% year-over-year (yoy) to $420.4m.

The loss was in line with analyst expectations. Wheels Up is committed to positive earnings in 2024. It is forecasting total sales of between $1.55bn and $1.58bn for the full year – it raised this 4% when it announced its result.

Active users increased by 11% to 13,339. Live flight legs rose by 7% since last year to 21,025, with continued flight demand driven by the growth in active members and the acquisition of Air Partner. Active Members grew 12% yoy to total 12,688

Flight revenue per live flight leg rose 20% since last year, up to $13,266, largely due to programme changes that included higher pricing and the introduction of a fuel surcharge.

Wheels Up said its net loss, which increased by $27.4m yoy, was due in part to higher spending. The company invested significantly in technology – particularly its own Fleet Management System (UP FMS). All of its aircraft are now on the UP FMS and Wheels Up said this is the first building block of its marketplace. It is also investing in a new Member Operations Centre in Atlanta, Georgia. This will open in 2023. It is also looking to cut sales and administration costs.

Wheels Up had $284m in cash at the end of September 2022, down from $785m at the end of 2021. The company announced a $270m enhanced equipment trust certificate backed by its fleet in October.

The company said it was eliminating the role of president, held by Vinayak Hegde since last October, to “streamline” the organisation. Kenny Dichter, CEO and chairman, said on an earnings call following the results that the group is prioritising safety and delivering “world class service with great pilots”. He added that removing the role would “improve focus and accountability”.

Dichter said: “Our current structure limits our ability to focus on driving specific outcomes at the appropriate levels in the organisation. In order to address this, we are eliminating the role of president and transitioning to a more granular organisational design focused on operations, digital transformation and more specifically our marketplace while evolving our product offering.”

Hegde, who served as chief marketplace officer before becoming president, will continue to work with Wheels Up in an advisory role. On Monday, he sold 9,592 shares of Wheels Up stock for an average price of $1.58, netting $15,155.36 in total. He now holds 2,065,385 shares in the company, valued at $3,263,308.30.

Todd Smith, chief financial officer, Wheels Up said the company is exceeding its pilot hiring goals with over 450 pilots hired so far this year. He said that while the number of pilots employed is increasing, there are problems with pilot scheduling due to FAA operating certificates, whereby a pilot certified on one aircraft type can’t fly the same aircraft on another certificate. “Even though we are one company, that creates unnecessary friction on our pilots’ scheduling, as well as added travel and logistical costs,” he said. Smith added that Wheels Up is working with the FAA to fix this and bring “greater scheduling flexibility,” which will improve the service and lower costs.

Smith added that Air Partner is “continuing to deliver ahead of initial expectations”.

Results at a glance: