In advance of its public listing on the New York Stock Exchange, the company presented analysts its lofty ambitions to revolutionize private jet access
Wheels Up founder Kenny Dichter believes the addressable market for private aviation can grow from its current $31 billion to $80 billion by 2025. It plans to be a key driver. Here’s how…
A detailed overview of each presentation during Wheels Up’s Analyst Day
“So if you’re tired of the same old story…turn some pages.” – REO Speedwagon
Ready or not, Kenny Dichter and Wheels Up plan to change the face of private jet access. It’s a big leap from marketing ploys like selling memberships through Costco. Beyond stump speeches at industry conferences, there will be the harsh spotlight from being a publicly traded company. If he’s successful, the lifelong entrepreneur will find his name alongside aviation innovators such as Pan Am founder Juan Trippe, former American Airlines chairman Robert Crandall, who ignited revenue management and frequent flyer programs, and inventor of fractional private jet ownership, Richard Santulli. The latter created NetJets, the world’s largest private jet operator, and gave Dichter his entree into the industry. In fact, Dichter might fly higher than all of them. Success would make Dichter the Jeff Bezos of private jets.
In a two-hour presentation to financial analysts Friday morning, the founder and CEO of Wheels Up, along with his leadership team, discussed various milestones, projected growth, and insights on where it’s coming from. More than that, they unveiled a dramatic vision for a private aviation marketplace they say could more than double the addressable market by 2025, democratizing the segment down to low single-digit millionaires. It will certainly be key in their plan to grow revenues from $695 million last year to over $2.1 billion by 2025.
And yes, you can argue that Amazon, Uber, Netflix, and Airbnb each faced far less daunting obstacles in unlocking supply via their marketplaces. It’s easier to ship books or position a Toyota Camry than move a HondaJet to El Paso for a charter customer on a day’s notice.
There will be easier access for consumers driven by proprietary technology. There will be international expansion and revenue from selling rentals on superyachts, villas, and a Wheels Up credit card. Yet, the core belief is by making it easier and creating lower price points during low demand periods, many more people and businesses will fly the private skies.
There are many elements to its vision. Wheels Up plans to take private aviation into new and diverse markets, not typically targeted by the industry. It also wants to grow the market of flight-sharing and by-the-seat flights, two segments that have yet to prove themselves. There will be a more efficient use of aircraft already out there, an ongoing industry goal. Of course, floating fleets are not new. Then there’s another question. How many private aircraft owners and small operators are truly thirsty for more charter business? We’re about to find out.
We must be intellectually honest about our track record as an industry, which is almost nonexistent as it relates to consumer diversity and inclusion…Within diverse segments lies a very large base of potential customers…– Francesca Molinari, Chief People Officer, Wheels Up
In the presentation (reviewed below), CTO Dan Crowe noted Wheels Up is building APIs allowing “distribution partners” to white label its budding marketplace as their private flight booking engine. If that includes mega-online travel agencies such as Expedia or Travelocity, it will extend the industry’s reach exponentially. We’re not sure. There was no question and answer period.
A natural parallel would be looking back to American Airlines with its Sabre booking system or United Airlines with Apollo. In addition to selling flights for their owners, they allowed the long-tail of smaller airlines to sell digitally through travel agents. Those global distribution systems drove industry load factors from under 60% in the late 1970s to around 90%. They also helped make airline travel much more accessible in the decades following industry deregulation.
When it comes to private jets, solving integrity issues of supply-side data will be key. To that end, Daniel Tharp, the chief platform officer, teased, “As we roll out (new technology) in the coming months, fleet operators will be able to publish their high-fidelity fleet availability in realtime making (the Wheels Up platform) the first hi-fi instantly searchable clearinghouse for private aviation aircraft supply.” What’s out there right now is mainly nothing more than query forms misrepresented in grandiose press releases.
Below are highlights from the morning organized by presenter.
Kenny Dichter, founder and CEO of Wheels Up
- Seven out of 14 top managers have joined inside of the past year. The additions have considerable experience in leading public companies and particularly digital marketplaces.
- Wheels Up post transaction will have an 11-person board of directors (below). It will include former AOL and Google executive Tim Armstrong and two representatives of Delta Air Lines, the largest shareholder. Ex-LVMH Asia chairman Ravi Thakran, who headers SPAC merger partner Aspirational Consumer Lifestyle, is on it. Founder and CEO Kenny Dichter is the only member of the company’s management.
Wheels Up’s Board of Directors
- The current private aviation addressable market is $31 billion. In 2020, Wheels Up had a $695 million share of the pie.
- “Democratization” can more than double the market by 2025. That assumes the 5% of 17.9 individuals with a net worth of $1-5 million flying private (and who currently spend an average of $11,000 per year) increases to 7% by 2025; 7.5% of the 1.9 million individuals with a $5-10 million net worth that flies private (and spends an average of $50,000-$60,000 per year) increases to 9.5%; The 10% of the 900,000 individuals with a net worth of $10-50 million (who spend $180,000-$250,000) and 100,000 individuals with a $50 million + net worth cohort flying privately (spending $280-$320,000) increases to 12%, and there is an increase in corporate flying.
- “While technology is really the unlock here, we see an $80 billion space by 2025 driven by by-the-seat, driven by sharing, and really driven by utility, efficiency, technology unlock.”
- Santulli’s creation of fractional ownership “might have been” the first disruption” in private flying since the Wright Brothers: “They started whole aircraft ownership.”
- Dichter’s previous start-up, Marquis Jet Partners, generated “around $4 billion” in jet card sales between 2001 and when he sold it to NetJets in 2010. July will mark 10 years since his departure.
- Wheels Up is moving down the pyramid, from purely a membership play to a marketplace. Its goal is to “disintermediate” the “last brick” in the pyramid, traditional charter (below).
The Private Aviation Pyramid
- The current private aviation market in the U.S. is fragmented. There are over 1,900 operators. Over 1,800 operate less than 10 aircraft.
- There are over 20,000 private aircraft. The average aircraft is on the ground 97% of the time. It’s similar to what Uber saw “with the American car parked 23 hours and 30 minutes a day.”
Private Aviation Is A Fragmented Market With Underutilized Assets
- After getting his “MBA from Berkshire Hathaway,” Dichter says Wheels Up is “more Netflix than NetJets.”
- Its membership business has provided the foundation for its marketplace strategy moving forward.
- Wheels Up’s growth since its launch in 2013 has been “a very deliberate build.” After starting with King Air turboprops, it introduced the Citation Excel/XLS in 2014 and then the Citation X in 2018.
- Wheels Up sold its 1,000th Core/Business membership in 2014. It reached the 5,000 membership mark in 2017.
- In 2017 Wheels Up raised $117.5 million from AccorFidelity, T. Rowe Price, NEA, and other investors.
- In 2019 it launched its entry-level Connect membership. It also introduced its capped rate light, super-midsize, and large cabin programs (below).
The History Of Wheels Up
- The year saw its acquisition of tech platform Avianis. Dichter calls it his “most important acquisition…think Double Click to Google.”
- 2019 also saw the purchase of light jet operator Travel Management Company. Then there was the announcement of the deal to acquire Delta Private Jets.
- In 2020, it entered a commercial agreement with Delta Air Lines as part of the acquisition. Wheels Up members earn status in Delta’s SkyMiles frequent flyer program. They can now use their Wheels Up accounts to purchase tickets on Delta. In addition to Delta’s top flyers, Wheels Up gets access to over 70,000 of Delta’s corporate accounts. SkyMiles members will be able to use miles to buy flights from Wheels Up.
- The DPJ acquisition added aircraft management and maintenance to its portfolio of services. Its acquisition of Gama Aviation Signature, which had operated its Wheels Up fleet, added more flight and aircraft management depth.
- In 2021 it sold its 10,000th Core/Business membership and expanded its super-midsize fleet by acquiring Mountain Aviation. It also made its Wheels Up app available to non-members. You can read our review of the app.
Wheels Up Revenue Growth Projections and Investors
- Durable Capital Partners has joined T. Rowe Price, Fidelity, Franklin Templeton, and the largest investor Delta Air Lines.
- Delta and Aspirational Consumer Lifestyle’s connections to LVMH provide “opportunities (for) global expansion.” “Opportunistic acquisitions” are possible.
- Additional growth drivers include “platform adjacencies like the boat business, the super high-end villa business, the financial, the credit card space. We just announced a great partnership with Bell Textron on VTOL, potentially moving to eVTOL when that technology is available. And, of course, flight-sharing, by the seat and sharing flights with folks and families.”
Greg Greeley, chairman of Wheels Up Markeplace
Before joining Wheels Up, Greg Greeley “was 18 years on Jeff Bezos’s hip at Amazon. He developed the Prime program with Jeff, then he went to work at Airbnb for (CEO Brian) Chesky (as) president of Airbnb Homes, which is 98%, 99% of the Airbnb business,” Dichter said in his introduction.
- “The truly great marketplaces end up introducing goods and services that the community didn’t realize existed and then started to really embrace,” Greeley told the analysts.
- “Where marketplaces have thrived in creating value, frequently what you see is highly fragmented markets. There’s really a poor discovery mechanism for a lot of the merchants or sellers on that marketplace. It’s usually plagued with legacy or lagging technology and, the consumers and sellers are faced with these constraints. Some of them regulatory, some of them artificial, some of those unintentional, and in many cases technology helps address those.”
The truly great marketplaces end up introducing goods and services that the community didn’t realize existed and then started to really embrace– Greg Greeley, chairman, Wheels Up Marketplace
- “Supply and demand are not really connected with any robust means, and by introducing a powerful marketplace, it really addresses some of these pain points or some of these challenges across the sectors…Amazon in e-commerce really focused on this ability to bring millions of sellers and to list hundreds and hundreds of millions of items. In doing so, Amazon provided an efficient discovery engine and an efficient purchase and delivery experience over the top of that.”
Private Aviation Is Primed For Disruption
- “In private aviation, you certainly see high fragmentation. It’s a highly fragmented market. The top 10 operators have less than 8% of the capacity in the market. Most of these operators are small, and in being so, they’re great operators with wonderful assets, but they lack the ability to build a really robust sales and demand engine and discovery engine to help them connect with the travelers. Many people in the industry are faced with…lagging technology, haven’t had the opportunity to invest in some of these front-end pieces, or they’ve been slow to adopt the new technology.”
- On average, the average plane is idle 97% of the time, and of course, that’s a massive opportunity for us to help introduce private aviation to a lot more travelers that can afford it and would understand and appreciate the value that is being provided.”
- “We’re really looking to help people discover Wheels Up and make sure that we’re driving that engagement into…a marketing funnel, because we really want to introduce private aviation to millions of customers that didn’t realize that the comfort, accessibility, of what we’re offering. In doing so, that’s going to connect to all of that underutilized supply.”
Lee Applbaum, Chief Marketing Officer
Lee Applbaum is an alum of Coke, Target, Radio Shack and helped create Patron’s multi-billion dollar valuation before joining Wheels Up last year.
- Experiences account for 65% of all discretionary spending, so It’s not just providing flights: “We connect loved ones, create memories, and craft experiences for a lifetime. These are priceless. And COVID has reminded all of us that things aren’t what matter, but experiences with those we love. What was once considered a luxury is now considered essential. We see that both with our individual and even with our corporate customers.”
Wheels Up ambassadors are all paying members, and many are investors…– Lee Applbaum, Chief Marketing Officer
- There’s a big room to grow: “A McKinsey study conducted in 2019 prior to the pandemic revealed that 90% of individuals who can afford to fly private don’t. Our goal then is to remove barriers and friction, make it more accessible than ever and generate trial…the reality is that once you’ve flown private, it’s hard to deny its allure.”
- Wheels Up brand ambassadors such as Tom Brady, Serena Williams, Russell Wilson, and Michelin Chef Thomas Keller are all paying members: “When you see that we enjoy relationships with more than 100 brand ambassadors, the immediate thought is that we have 100 paid endorsers. The truth, however, is quite different…Wheels Up ambassadors are all paying members, and many are also investors.”
- How about a Miss Dior or Hublot branded King Air? “With the relationship with Aspirational, we expect to really lean into the partnerships with the LVMH portfolio, which is unparalleled in the luxury world.”
Francesca Molinari, Chief People Officer
Before joining Wheels Up in January as Wheels Up’s first chief people officer, Francesca Molinari held leadership positions at eBay, Adobe, and GE Capital.
- Giving back is part of the brand: “Wheels Up has always had a culture that cares and wants to give back. It’s in our DNA. We created the Wheels Up Cares and the Meals Up programs to use our platform to do good in the world.”
- Diversity, equity, and inclusion are driving forces internally and externally “targeting segments that private aviation has largely ignored. We must be intellectually honest about our track record as an industry, which is almost nonexistent as it relates to consumer diversity and inclusion. That is not only incredibly disappointing, even troubling. It’s also a missed opportunity. Within diverse segments lies a very large base of potential consumers, some of whom over-index on travel and hospitality.”
Wheels Up Focus On Diversity And Inclusion
- “In 2019, women, African Americans, Hispanics, and the LGBTQ+ communities spent more than $400 billion on travel in the United States alone, and yet these groups have been largely invisible to private aviation. We want to invite these consumers to join us and to have them fully enjoy the Wheels Up experience.”
- “Wheels Up is a young company, and as such, we’re at the very beginning of launching our formal DEI efforts. We’re starting by developing our DEI North Star and guiding principles, which provide us with the foundation from which we will craft external as well as internal programs and processes.”
Jason Horowitz, Chief Business Officer
Horowitz joined Wheels Up in 2013, first as general counsel then as COO before moving to his current role.
- “At the end of 2020, we had over 11,300 active users, including more than 9,200 active members, and for the full year, we flew more than 150,000 passengers on approximately 45,000 flights.”
- “To date, our demand has by design almost exclusively come through our industry-leading membership program. From day one, our membership has been based on three pillars, or key-value propositions: the aviation offering at the center of the experience, our member-facing technology, and our lifestyle programming, which we call Wheels Down.”
- Wheels Up Connect ($2,995 to join; $2,495 to renew) was launched in 2019 as an option for members and prospects who weren’t flying frequently enough to justify the Core membership ($17,500 to join; $8,500 to renew): “We saw 275% year-over-year growth in active Connect memberships, and Connect memberships now make up close to 25% of our total active membership.”
- Approximately 45% of Core and Business members purchase fund programs depositing between $50,000 and over $1 million.
- Connect members can also now deposit funds, starting at $25,000, and there has been “strong early adoption.”
- “Date, time, region, amount of advanced notice, market demand” are key drivers in the dynamic pricing that can save members money with rates below their contracted rates caps.
- Dynamic pricing with the rate caps gives Wheels Up an advantage over fixed-rate jet cards with “reduced cost on slower demand days and protection against market pricing surges on the industry’s busiest days (below).
Wheels Up’s Dynamic Pricing And Capped Hourly Rates
- The Mountain Aviation Citation X fleet “gives us a strong value proposition” for capped-rated flights between the east and west and proves “very popular.”
- The retention rate for members spending more than $25,000 annually “approaches 90% and exceeds 90% for those spending $50,000 or more.” Retention is 94% for members who deposit funds.
- “Attendance at just one lifestyle event or activation of a single benefit drives overall retention up by 500 basis points to 85% across our Core and Business members.”
- Since 2014 Core and Business members have spent on average between $70,000 and $75,000 per year.
- Technology will help Wheels Up win new flyers who aren’t super-rich. There are 17.9 individuals with a net worth between $1 million and $5 million. An additional 1.9 million have between $5 million and $10 million (below).
Expanding Private Aviation’s Addressable Market
- Making private aviation more user-friendly will broaden the market. That means customers “who can spend $5,000, $10,000, maybe $20,000 on one or two trips, or even share a flight or two.”
- 80% of Wheels Up members expressed willingness to share flights with other members.
Thomas Bergeson, Chief Operating Officer
Lt. General Thomas Bergeson joined Wheels Up last September after a 35-year career in the Air Force. His final assignment was as Deputy Commander of U.S. Central Command. He was responsible for all U.S. and coalition military operations in the Middle East, Southwest, and Central Asia countries.
- “Our commitment is to have the right plane, at the right place, at the right time, every time. While this is simple to say, this could be really challenging in practice due to the very dynamic nature of private aviation and the many variables that must be taken into consideration.”
While this is simple to say, this could be really challenging in practice due to the very dynamic nature of private aviation and the many variables that must be taken into consideration– Lt. General Thomas Bergeson, Chief Operating Officer, Wheels Up
- “Wheels Up safety standards are well above the minimum required because safety is foundational to everything we do. Our safety standards are a unique attribute that our customers value, and importantly, we apply the same high safety standards to all aircraft that a customer might fly on, whether on our own fleet or one of our approved vendor’s aircraft.”
- “The management and execution of flight operations are filled with complexity with multiple variables to consider, such as the temperature and weather, the runway length, the weight and balance of the aircraft, pilot qualifications and currencies, aircraft maintenance schedules, to name but a few. And private aviation has one significant difference from commercial airlines: our schedules change every single day. No two days are the same.”
- Access to smaller airports brings challenges: “These executive airports often have unique restrictions and operating hours which can change regularly. Adding to the complexity, our pilots also have to be scheduled to meet up with their aircraft at a location not known very far in advance because there is no home base.”
Private Aviation Is Complicated
- “Wheels Up has strategically positioned ourselves to solve these problems of fragmented supply, outdated technology, opaque pricing, old school broker networks, underutilized aircraft, and the inefficient matching of demand to supply.”
- “To address those challenges, Wheels Up has built our fleet very intentionally. We started with a first-party business by purchasing 72 King Air aircraft. The ownership of these aircraft gives us full scheduling control and therefore maximizes our flexibility and enables us to make guarantees to our members. This first-party, or controlled fleet, now consists of 170 aircraft of all cabin classes and serves as the foundation of our business.”
- “We strategically added a second-party business, which will be a key component of growing our asset-light fleet. We manage 170 aircraft that are owned or leased by others. The owners pay us a monthly management fee, and while some of our owners prefer to keep their aircraft in Part 91 for their sole use, most of our owners make their aircraft available to Wheels Up to charter in our marketplace under Part 135.”
- “Access to (third-party vetted) aircraft is what allows us to scale our supply very quickly on a daily basis to meet our demand without having to own the aircraft ourselves. Through the use of the guaranteed rate program, where we guarantee a vendor a certain number of revenue hours at a set price, we’re able to gain scheduling control of vendor aircraft and their pilots for several days. We can then utilize them as part of our floating fleet and can string together multiple revenue flights much more efficiently than a vendor could through those old-school brokers.”
Wheels Up’s Fleet
- “Within our own fleet, we have the opportunity to significantly increase our capacity without buying more aircraft. We will do this by increasing the dispatch availability of our controlled fleet through in-house maintenance. In fact, this year, we’ve begun building an organic maintenance capability to do both scheduled and unscheduled maintenance throughout the country. We have major maintenance facilities in Cincinnati; Fort Lauderdale; in Elkhart, Indiana; Broomfield, Colorado, as well as mobile service teams at high-density locations, with plans to add more.”
- “The retail cost for scheduled and unscheduled maintenance is very high. By bringing maintenance in-house, we can greatly reduce the direct operating costs and ensure we complete the maintenance on time and with great quality assurance. The result will be higher aircraft availability, which, in turn, will lead to higher aircraft utilization. And any additional utility we get on our own fleet will fall to the bottom line.”
- “We will have 24/7 maintenance operations to ensure an aircraft is quickly returned to service. We can also sell maintenance for retail when we’re not working on our own aircraft because we are Part 145 certified (below).”
In-House Maintenance Improves Dispatch
- “Most individual aircraft owners, or mom-and-pop third-party operators that own a few aircraft operate their aircraft from a home base. These aircraft generally return to base after each flight, resulting in an efficiency of 50%. Using a floating fleet strategy, efficiencies can be greatly increased, as the number and length of non-revenue flights can be significantly decreased. As we add more and more aircraft to the fleet, the ability to fly in a more optimum pairing also increases, but the scheduling workload to build this optimum schedule also increases.”
Floating Private Jet Fleets Vs. Home-Based Private Jets
Dan Crowe, Chief Technology Officer
Dan Crowe joined Wheels Up five years ago as CTO. Prior to that he held similar positions at Weight Watchers and AutoTrader.
- “Wheels Up is building a complete end-to-end private aviation marketplace platform that connects flyers to private aviation and one another. We believe there are three essential technology components, the proverbial three-legged stool, to a successful marketplace. You need all three to succeed at scale in this complex industry.”
- “Our consumer-facing front end. It features our highly-rated mobile and web applications, which are easy to use and deliver real-time pricing and instant booking.”
This is real technology. It’s not a data collection form disguised as a booking app. We price and book flights in real-time, and we have booked many thousands of flights digitally.– Dan Crowe, Chief Technology Officer, Wheels Up
- “Our intelligent middle tier includes a dynamic pricing engine, a rules engine to drive personalization, and our proprietary optimization algorithms.”
- “Our back-end platform for operations and suppliers features Avianis technology which will power the Wheels Up fleet and advance marketplace functionality. Over 100 operators use Avianis and will have the opportunity to connect to our marketplace platform.”
- “This is real technology. It’s not a data collection form disguised as a booking app. We price and book flights in real-time, and we have booked many thousands of flights digitally. Our members and consumers enjoy our easy and convenient flight search, our Uber-like AI, which makes it easy to compare aircraft categories, transparent pricing, special deals, alternate date travel options, and, of course, instant booking right in the app. We take your payment, and we have committed that trip to you right there.”
- “We’re also building APIs that will allow distribution partners to use Wheels Up as their private flight search engine. This lets us extend the reach of our brand.”
- “We’re also making enhancements to our buy the seat programs, building on our Shuttles and Shared programs.”
- Flight sharing and discounts will drive use: “Let’s say you have a house in Greenwich and a house in Florida. The grandkids live in Atlanta. You can set alerts for hot flights or empty legs for these routes to fly them in when opportunity knocks. Additional alerts can let you know there are special deals going north and south on certain days, so you can take advantage as you move between homes. You can set your sharing alerts to let you know when another member is taking a similar flight, and you can, perhaps, split the costs.”
Matching Private Jet Supply And Demand
- “An important capability that sets us apart from others and creates a deep moat around our business is our proprietary data and data science capability, which forms the middle tier of the platform. Pricing, feasibility, optimization, and advanced analytical capabilities enable us to deliver a great consumer experience and attract the best suppliers.”
- Fool-proof technology helps novice book confidently: “It means the aircraft you pick with the passenger load you told us, it can actually make that mission, and we’re not going to let you book a flight that isn’t going to be feasible. Others do. We don’t. We take great care with that.”
- “Our revenue management and flight operations groups work interdependently to align available supply in the network with flight demand using real-time booking data and predictive analytics.”
- Private aviation is lagging. “The technology ecosystem in private aviation is less robust than other categories. There’s no GDS like Sabre or Amadeus. There are really few data providers. There’s a very small software ecosystem, so for key functions like pricing, feasibility, and optimization, the buy versus build analysis comes up to build, and building takes investment and a large, talented team. Few have that, but Wheels Up does. We believe having the proprietary technology with a large and skilled team gives us a significant competitive advantage because it’s difficult to replicate.”
Wheels Up’s Proprietary Technology
- “Data is the fuel for these capabilities, and in the past, reliable data has been hard to come by in the private aviation space. We serve tens of thousands of flyers on thousands of flights across a wide spectrum of aircraft and operators and have strong CRM capabilities…consumer data, behavioral data, pricing data, flight pattern data, seasonality data, and more. We use this data to tailor our algorithms for predictive demand, predictive supply, sharper pricing, and a more personalized consumer experience.”
Daniel Tharp, Chief Platform Officer
Tharp founded Avianis and joined Wheels Up when it bought the company for $14.4 million in cash and 2,011,495 in common interests in September 2019.
- “When we set out to build the Avianis FMS (Flight Management System) 12 years ago, it was clear that fleet management companies didn’t have much in the way of current web and mobile solutions to help manage the many unique aspects of their business. Many were running legacy solutions or attempting to customize commercial off-the-shelf systems to manage their fleet, while others were still operating with manually managed schedules and crew rosters, so the opportunity was great for us to enter in the space with an aviation business management suite built in current cloud and mobile technologies.”
As we roll out this technology in the coming months, fleet operators will be able to publish their high-fidelity fleet availability in realtime making this the first hi-fi instantly searchable clearinghouse for private aviation aircraft supplyDaniel Tharp, Chief Platform Officer, Wheels Up
- Behind Avianis FMS: “First, you have scheduling, which looks at existing schedules across the fleet in conjunction with aircraft maintenance requirements. Next, you have crew management, which takes into account all of the regulatory and safety requirements needed to put a legal flight crew on the aircraft. Once the flight is scheduled, you move into trip services coordination and passenger management. Then, on the departure date, the operation moves into day of flight tasks like dispatch, flight tracking, and trip services quality assurance. After the flight, there are a number of workstreams for crew logs, case management, and billing.”
Avianis Flight Management System
- A global private jet search engine: “This complex technology is built to provide supply-side transparency and frictionless flight transactions. As I mentioned previously, the FMS handles all aspects of the fleet schedule, including aircraft maintenance and crew requirements for the operator, meaning just because an aircraft is sitting on the tarmac doesn’t mean it’s actually available to service demand. The aircraft has to be airworthy, and there has to be a crew available to legally and safely fly it. This comprehensive schedule represents what we refer to as a real-time, high-fidelity view of the inventory, not only for our own fleets here at Wheels Up but also for our fleet partners. This is when the global aircraft search engine comes into play. As we roll out this technology in the coming months, fleet operators around the world will be able to publish their high-fidelity fleet availability in real-time, making this the first hi-fi instantly searchable clearinghouse for private aviation aircraft supply.”
A Global Search Engine For Private Jets
- The result: “This, in short, allows operators to fully link flight transactions digitally. As a comparison, much of this happens via email and phone calls today, meaning every itinerary change, passenger add/drop, request for change in departure time, catering and ground transportation coordination have to be manually communicated between buyer and operator of any given flight. This is inefficient, to say the least, and is certainly way too time-consuming to efficiently and effectively manage large-scale demand across many separate aircraft operators. TripLink digitizes all of the flight transactions, making for a frictionless transactional environment where changes on all sides of the flight are seamlessly communicated and implemented with much more efficiency.”
Eric Jacobs, Chief Financial Officer
Before joining Wheels Up in 2018, Eric Jacobs was CFO at Dealertrack, a publicly traded technology company that led analog to the digital transformation of retail automotive. While at Dealertrack, the company grew annual revenue from approximately $250 million to over $1 billion before selling to Cox Automotive.
- “Wheels Up had over 9,200 members at the end of 2020. That doesn’t include over 800 jet cardholders from Delta Private Jets.”
- “Annual dues will continue to be the key driver of membership revenue, and our current five-year financial projections factor in high teens revenue growth rate for membership revenue…We are focused on attracting members to engage with the marketplace and fly, and we want to make sure they see value at whatever level makes sense for them at the time. We also expect to see members moving back and forth between membership levels, as some do today.”
- Membership revenue will grow from $55 million in 2020 to $121 million by 2025.
- Flight revenue will increase from $495 million last year to $1,495 billion in 2025.
- Aircraft management revenue, international expansion, revenue from its Delta partnerships, and collaborations with luxury brands will go from $145 million in 2020 to $521 million by 2025 (see below).
Wheels Up’s Evolving Business Model
- Live legs (flights with revenue passengers) will grow at a mid-to-high teens rate annually over the next five years, and “We expect to outpace overall industry growth.”
- “We anticipate that flight revenue per live leg will increase at a mid-single-digit rate in our current projections.”
- “Stage lengths are up during COVID, as customers have generally traveled further within the U.S. but less frequently.”
- “Aircraft management plays a key strategic role for us as we scale our business in an asset-light manner. Therefore, we may make trade-offs from time to time to obtain access to certain aircraft that are well-suited for the marketplace.”
- In 2018, 85% of Wheels Up’s flight hours were on-fleet. Last year, only 55% of flight hours were on-fleet. By 2025, the company expects the majority of our flights will be provided off-fleet.”
- “We can improve our control fleet unit economics and reach or exceed 30% plus target margins by improving utility, efficiency, and bringing maintenance in-house, among other things.”
- “Our King Air fleet is the biggest opportunity and the challenge. Our King Air fleet operated in 2020 at less than 30 hours of utility per month per aircraft, and close to breakeven financial. However, these aircraft have the ability to operate well north of 45 hours per month, so even at 45 hours, there’s a 50% plus of capacity expansion potential for the King Air fleet as of the end of 2020.”
- Managed and third-party fleets are asset-light and have target margins of 15% to 25%.
Wheels Up Fleet Mix
- “We have begun to expand our use of guaranteed rate programs. GRPs are when we contract with particular aircraft at fixed hourly rates and minimums for a limited period of time. Then, through cost network optimization, we can generate very attractive incremental margins, so that’s a win-win-win for us, our customers, and aircraft owners of these fleets.”
- “Based on past Core member surveys conducted before COVID and recent program enhancements, we estimated we were getting less than half of their private aviation spend.”
- “Our active members, which ended the quarter at approximately 9,900 active members, (are) up 59% year-over-year. Live legs were also very strong for the first quarter, totaling approximately 14,750, up more than 25% year-over-year on an actual basis, with particular strength in March.”
- After having a $52 million EBITDA loss last year, Wheels Up expects to cut the deficit to $29 million this year and turn a profit in 2022. By 2025 it projects an EBITDA of $201 million (below).
Wheels Up Financials
- “We remain very confident in our current projections for 2021. Longer-term, we have a lot of opportunities to show strong incremental margins to drive our Adjusted EBITDA margin close to 10% in 2025 and grow it from there with more leverage on G&A and technology and sales and marketing.”
Kenny Dichter’s Excellent Adventure
Dichter concluded the presentation by saying, “Democratization of private aviation is what we’re here to do, powered by a next-generation technology, Avianis, and we want to bring this to millions of consumers from a market today that only serves hundreds of thousands.” It’s a lofty goal worthy of admiration in an industry more complex than selling books and bedrooms.