Wheels Up Q2 revenue soars 49% to $425 million, with a $92 million net loss

By Doug Gollan, August 12, 2022

The company is promising to reach EBITDA profitability in 2024 as it moves to increase efficiency by combining its operating certificates in 2023

As Wheels Up posted record revenues and another significant loss, executives say program changes made earlier this year are paying off.

The changes, which went into effect June 1, 2022, hiked hourly rates, daily minimums, peak days at lower level tiers, and some call-outs.

The big news was, once again, there was no problem with the top line as quarterly revenue ballooned to $425 million, a 49% increase from 2021.

However, the net loss increased to $92 million.

Powered by $333 million in block sales, Wheels Up ended the quarter with $427 million in unrestricted cash, something new CFO Todd Smith said gives the company “flexibility.”

Improving Operations

Among the key updates, President Vinayak Hegde says Wheels Up is still expecting to complete the integration of its operating certificates in 2023.

The Part 135 certificates come from its multiple acquisitions of operators, and until they are combined, Hegde said, inefficiencies, including pilot scheduling, hamstring the company.

Currently, training, scheduling, and even maintenance all need to be done under each certificate’s differing rules and protocols.

“We are working with the FAA to do the consolidation,” Hegde said.

He also told analysts that “better demand forecasting” will help it buy off-fleet charter flights, which it refers to as 3P, more efficiently. 1P is Wheels Up owned/leased fleet, while 2P is aircraft it manages for owners.

Hegde also promised operational improvement. “Now that our supply and operations schedules are on Up FMS, we are working to layer on optimization in machine learning technology to help manage our daily operations in real-time. This will be critical as we respond to last-minute customer travel changes, adverse weather, and anticipated maintenance events in various unforeseen circumstances that happen regularly.”

“Our strong market position and iconic brand helped drive record revenue in the second quarter, and another quarter of growth in prepaid blocks speaks both to the steadfast loyalty of our member base and the continued consumer demand for private aviation,” said Chairman and CEO Kenny Dichter.

The founder also pointed to the New York-based provider’s trajectory. “Today, we are a clear leader in on-demand private aviation with a growing base of more than 12,500 active members, and we are poised to deliver over $1.5 billion of revenue this year, up from around $300 million just four short years ago,” Dichter told analysts.

Wheels Up Q2 2022 Financial and Operational Highlights

  • Q2 2022 Revenue increased 49% from $285 million to $425 million
  • Q2 2022 Net Loss ballooned from $29 million to $92 million
  • Q2 2022 Adjusted EBITDA loss increased from $8 million to $47 million
  • H1 2022 Revenues increased 37% from $547 million to $751 million
  • H1 2022 Net Loss increased from $61 million to $182 million
  • H1 2022 Adjusted EBITDA loss increased from $17 million to $96 million
  • Q2 Prepaid Block Sales increased from $116 million to $333 million, a 180% increase
  • Cash and Cash Equivalents dropped to $427 million from $538 million at the end of Q1. This was mainly due to the acquisition of Air Partner
  • Q2 Live Flight Legs increased 19% to 21,705
  • Q2 Flight Revenue per Live Leg increased 12% to $13,088

Todd Smith, the new CFO, says he expects a boost from non-member bookings who charter flights at market rates.

Core members get capped hourly pricing.

Wheels Up Membership (as of June 2022)

PeriodActive Members
Q2 202212,667
Q1 202212,424
Q4 202112,040
Q3 202111,375
Q2 202110,515
Q1 20219,896
Source: Wheels Up

However, Smith said the bottom line was hit by increased expenses from booking members with partner operators, as well as increased sales and marketing, as Wheels Up reinstated events canceled due to Covid.

The company also increased spending on technology during the quarter to $14 million from $8 million.

Analysts Rate Wheels Up

Sheila Kahyaoglu of Jefferies, who has the company as a Buy, pointed to Wheels Up’s quarterly revenue, which beat estimates.

She also noted the company “raised marginally” its full-year revenue guidance from $1.48-to-$1.53 billion to $1.47-to-$1.52 billion.

“UP has hired 350 pilots since the beginning of 2022, ahead of the plan to hire 200 pilots by Q2, with 100 hired since May. The company has also worked to secure additional flight simulator time to support pilot training,” she added.

After the call, Gary Prestopino of Barrington Research wrote, “We are maintaining our Market Perform investment rating on Wheels Up.

He pointed to Wheels Up’s strong revenue growth. “The most important aspect of the call is that the company believes it will generate positive adjusted EBITDA in 2024,” according to Prestopino.

Morgan Stanley maintains its Sell rating. It said, “Q22 results speak to the continued strength in the travel recovery; however, cost pressures remain, as we reduce our ’22/’23 EBITDA by 12%/15%. Automation initiative in focus as we look for evidence of increased operational efficiencies (fewer dead legs, improved routing).”

There were also concerns about the great economy. “We stay on macro watch, as questions regarding go forward private travel demand remains. While UP’s consumers skew higher income, the product is also largely discretionary.”

Wheels Up reported its earnings after the market closed. Its stock ended the day at $2.55. Its 52-week price has ranged from $1.81 to $9.05 per share.

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