In 2017, Wheels Up continued its prolific fundraising. In 2018 it’s expanding its reach with a Citation X fleet. Now it confirms an IPO may be on the way.
Kenny Dichter, the founder and CEO of Wheels Up, has carved a preeminent spot for himself in the world of business aviation. In 2001 he approached then NetJets Chairman and CEO Richard Santulli with the idea he would buy shares in aircraft from the Warren Buffett owned fractional aircraft operator and then resell them in 25-hour chunks as jet cards. At the time, there was just a handful of players in that young jet card segment. Fractional shares start at 50 hours, so the idea was that Marquis Jet Partners would act as an entry point funneling customers to NetJets as their private flying increased. It did, but it also opened up a new market – affluent individuals and companies that didn’t want to commit to the then five-year contracts that fractional ownership entailed or didn’t anticipate needing 50 hours. It was easy. When you went through your 25 hours, you would call up and buy 25 more hours. There were no monthly management fees. When you flew, you paid.
In 2010 with Santulli gone, NetJets bought Marquis Jet Partners and in 2013 Dichter reappeared riding an unlikely horse, the workhorse Beechcraft King Air 350i. With nearly 80% of private flying for journeys under two hours, Dichter identified that on shorter flights and in high-density corridors, only a small part of the actual flight was spent at maximum cruising speed. In other words, you didn’t lose that much time being on a turboprop.
Comparing the King Air, long a popular aircraft with companies operating to rural airports, to a Jeep or Land Rover, Wheels Up has been built on a different jet card model in Dichter’s second trip to the party. Instead of paying six figures up front, members sign up and pay a $17,500 fee to join, then pay as they fly with guaranteed availability for most of the year. You can also prepay to add the number of days you get guaranteed availability. There are fixed one-way rates. There is also the Citation Excel/XLS, but without coast-to-coast range, the Wheels Up fleet had its limits…until now.
Wheels Up 2018-2010 Outlook
Dichter, speaking to Private Jet Card Comparisons this morning, confirmed a report Friday by Corporate Jet Investor that an IPO is indeed on the way. “We are putting the pieces in place and people in place to prepare for a possible IPO 12 to 24 months out,” he said. Earlier this month Wheels Up named Eric Jacobs, who has broad experience in IPOs and acquisitions, as CFO. “Business aviation is clearly fragmented and, over time, there may be acquisitions that make sense to us…There are a lot of opportunities,” Jacobs told the B2B aviation publication and website. Dichter declined to comment when asked if he was looking at a possible deal for XOJET, which earlier this year announced it had hired Perella Weinberg Partners to explore business options.
Dichter tells us that by month’s Wheels Up will have three Citation Xs on the certificate, like the rest of the fleet flown by IS-BAO Stage 3 operator GAMA Aviation. He expects by the end of 2018 to be flying seven or eight of the super fast jets that can make speeds of over 700 miles an hour. They will take Wheels Up from short hops and medium-range flights to a coast-to-coast player. Hawaii and Europe are not in the works at this point, Dichter says, although the X has the range.
Wheels Up Pricing
Dichter says initially the eight-seat Xs will be made available to Wheels Up members on a first-come, first-served basis, so no guaranteed availability yet. He said hourly rates will be released shortly “before the summer” and says the airplanes will be initially used to “supplement the fast-growing Citation Excel/XLS program” so, in other words, members may see some upgrades in the beginning.
Currently, the King Air 350i price is $4,495 per hour and the Citation Excel/XLS price is $7,495 per hour, both including 7.5% FET. Wheels Up includes deicing in its pricing and offers guaranteed WiFi. In terms of what to expect for the Citation X, as a comparison XOJET sells the X $8,500 per hour including FET. The XOJET program includes both an initiation fee and monthly membership fee.
While Dichter is mum on a possible expansion to Europe – something that is reportedly in the works, we are interested to see how the addition of the Citation X will change Wheels Up’s profile. While it may be true that many private jet users focus their flying on flights under three hours, using private aviation to link airports where there is limited or no nonstop service or for travel with the family, the Citation X broadens the jet card membership seller’s appeal to a swath of customers who want a one provider solution, but also want to know they have a fixed price coast-to-coast option as part of the program.
If Wheels Up does an IPO it will be a rare bird as a publicly traded company. Air Partner is traded on the London Stock Exchange, although jet cards are just a segment of its business. NetJets, Jet Aviation and Delta Private Jets are of large publicly traded companies, but details of their jet card businesses are not broken out. Blue Star Jets founder Ricky Sitomer is seeking to trade Star Jets International as a small cap stock. You can compare Wheels Up programs against over 250 jet card programs here.