Wheels Up has hired Goldman Sachs and Bank of America for 'strategic initiatives'

By Doug Gollan, January 31, 2019

The pay-as-you-go jet card membership club is moving towards “consolidation”

What’s next for Wheels Up? The company with its fleet of approximately 100 King Air 350i turboprops, Citation Excel/XLS midsize jets and Citation X super midsize aircraft is stirring some intrigue after its founder and CEO Kenny Dichter appeared yesterday morning on CNBC’s Squawk Box.

Wheels Up Super Bowl Play

Dichter in the past has used the morning show to announce various initiatives started by discussing his line-up of endorsers on both sides of the football for Sunday’s Super Bowl clash in Atlanta. In addition to multiple time world champions Tom Brady and Bill Belichick from the New England Patriots, Wheels Up has in its stable the Los Angeles Rams quarterback Jared Goff and its wunderkind head coach Sean McVay. In other words, whatever happens on the field, Wheels Up will be in the winning locker room.

Wheels Up Kenny Dichter

It’s after that, however, things got more interesting, at least from a financial news perspective. Dichter had previously used the venue to announce his intention for an IPO. The show’s Joe Kernan wanted an update. Dichter didn’t disappoint. He told him, “We hired Goldman Sachs. We hired Bank of America and our tried and true (investment bankers) Jefferies is helping us.”

More than an IPO for Wheels Up

It turned out there may be more than a pure IPO in the works. “There’s an unbelievable consolidation opportunity in our space…We have the billion-dollar brand,” Dichter said, continuing,  “I’ll give you our business model over the next three years. What if it were as easy to book a private airplane as it was to book aa Uber or Air Bnb?”

He then told viewers,  “We have the number one tech team quietly run by Dan Crow who ran the marketplace at Auto Trader and he did the subscription business at Weight Watchers. He has 50 people working 24-7 on building this marketplace.”

Consolidating private aviation

Of course, the word consolidation caught the attention of anchor Andrew Ross Sorkin. He then interrupted and asked, “Are you talking about a roll-up of a lot of other companies as part of an IPO? Is that something you do in advance?”

Dichter said, “I think it’s all connected. You need currency to be able to consolidate folks in.”

Sorkin proffered, “So you go public, use the currency of the stock to then buy-in and bolt on?”

Wheels Up King Air price is $4,695 per hour plus FET

Dichter quickly responded, “There’s a lot of subscale players in our space. If you can put some people together – the Amazon model – what Bezos did – (in addition to the organic business) that’s a big consolidation play.”

Dichter added, “Our consolidation play and our marketplace play is a really simple play. There are 1,000 (private charter jet) operators that matter in the world and about 5,000 airplanes in the world that can play in this charter market. It’s our job to be the Amazon box. Amazon ships books, but they also ship Samsung televisions.”

Wheels Up light jet program

When asked about buying more planes, he hinted at the light jet off-fleet program that we previously reported and has already been teased to members. “To start the Four Seasons’ Izzy Sharp had to build a few hotels (before expanding via management contracts),” he said. Dichter also talked about what we’ve also reported on – a likely new lower tier membership. He is following the American Express model with black, platinum, gold and green cards, calling its current membership priced at $17,500 in the first year the top tier.

What about NetJets?

When asked if the strategy is to take share from NetJets, Dichter said, “NetJets, Flexjet, VistaJet. They have a legacy position like Channels 2, 4 and 7. We’re trying to be like Apple TV.” He inferred deals may more likely be in the tech space as opposed to added aircraft or any of the numerous small operators.

While the idea of a closed fleet of vetted third-party operators isn’t new – both Sentient Jet and XOJET use that approach in terms of their jet card and brokerage businesses – clearly Wheels Up will leverage the brand equity it has been building via its high-profile sponsorships as it goes down that route.

Updated Statement

Late last night on the CNBC website, Dichter issued a statement that said, “We have hired advisors to assist us with our pursuit of strategic initiatives that include exploring acquisition opportunities and expansion of our digital platform…Our plan calls for leveraging proprietary technology that will allow Wheels Up to bring private air travel to the broader public, and make booking a private airplane as simple as booking an Uber or an Airbnb.”

Deja Vu all over again

We reached out to Dichter to find out if Wheels Up would be open to being acquired. M&A activity is currently a hot topic in business aviation. There was XOJET’s September acquisition by Vista Global that begun with a similar statement early last year. Directional Aviation, another major player in the market, purchased of PrivateFly to add to its flying brands which include Flexjet, Sentient Jet and Skyjet. In the same way that Amazon snapped up Whole Foods, some in the industry think an outsider like Uber might jump in and buy something to establish a foothold.

To borrow an expression from baseball great Yogi Berra, it’s not unreasonable to think it could be “deja vu all over again.” It was Dichter who helped propel the early generation of jet cards via an exclusive sales agreement he struck with NetJets that was the foundation of his Marquis Jet partners. He sold that company to the Berkshire Hathaway subsidiary in 2010 before coming back to launch Wheels Up in 2013.

In the meantime, we’ll wait to hear news from Wheels Up about the fixed-rate light jet program. It’s something in our opinion that will be both important for current members and enhance the appeal to its full-on segment of private flying customers. We are also looking for Wheels Up to (finally) launching fixed rates on its Citation Xs or create a fixed-rate super midsize program.

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