Private aviation membership provider Wheels Up has added KKR to its roster of investors, securing $90 million in debt financing as part of its plan to grow to 75 King Air 350is. It also operates the Citation XL/XLS. CEO and Founder Kenny Dichter broke the news this morning on CNBC’s Squawk Box. He said the deal closed this past Friday. There was no information on the investment posted on either of the company’s websites. Other investors include Fidelity and T. Rowe Price. The company was launched in 2013.
On Squawk Box, Dichter told the hosts, “We built a billion dollar brand. Now we have to build a billion dollar business behind it.” He said, “We’re on a runway to $300 million, and we’ll be EBITDA positive exiting this year. We have an asset intensive business. Over the last three-and-a-half years we put $600 million to work (buying airplanes).”
Speaking about the new investment, Dichter said KKR “has joined our debt stack…We’ve raised over $400 million in debt to get our aircraft from Textron. KKR has just stripped in $90 million and that’s our next 17 aircraft (which takes us to 75 King Air).”
Dichter said that the market for the Wheels Up program is as broad as 1.5 million U.S. households compared to fractional ownership which he said is in the “couple hundred thousand” range. Previously he said his goal is to have 20,000 “sticky members” by 2020. He noted, “80% of private flights in North America are less than two hours,” and pointed to the King Air’s eight-seat capacity at $4,295 per hour as opening the market to a broader audience when split between two or three families. There is a one-time membership fee of $17,500 and annual dues of $8,500 starting in the second year. Costco members can get a $3,500 Costco Cash Card when they buy a Wheels Up membership through the giant retailer.
In terms of sales, he said the company is close to doubling its memberships year-over-year, significantly ahead of plan. He also told hosts, he is not worried about a recession, and that in a downturn, Wheels Up will gain jet and fractional share owners trading down. “In a recession, we’re the last stop before La Guardia or LAX. There would be a lot of trade down to Wheels Up,” he said.
Private Jet Card Comparisons gives registered users a 65-point comparison of the Wheels Up programs across the over 100 jet card programs we analyze. Among the key features are one-hour daily minimums, good for the short-haul flyers the company is targeting. Its entire fleet is WiFi enabled and also features GoGo Text & Talk. Lead time for reservations is 24 hours. The minimum age for children traveling alone is 16. The company’s fleet is operated on its behalf by GAMA Aviation, one of about 700 operators worldwide to be certified IS-BAO, generally considered the highest standard of safety in private aviation. Wheels Up does not have an escrow program.
Dichter said the two most important components of its success are “trust and safety.”