Dichter resigns as Wheels Up revamps jet card program; reports Q1 financials

Wheels Up’s Founder and CEO Kenny Dichter replaced by CFO Smith as Interim CEO; Core Membership program restructured.

By Doug Gollan, May 8, 2023

Wheels Up’s Founder and CEO Kenny Dichter steps down; Core Membership program restructured into East and West zones

Wheels Up Founder, Chairman and CEO Kenny Dichter is stepping down immediately. CFO Todd Smith becomes Interim CEO. Board Member Ravi Thakran becomes Executive Chairman. At the same time, the company is restructuring its capped-rate Core membership program, per a flurry of press releases issued this morning.

The dual announcements came shortly before the New York-based private aviation provider reported Q1 financial results.

Wheels Up Q1 2023 Results

Wheels Up also reported Q1 financial results:

  • Revenue increased $26 million year-over-year to $352 million, a first-quarter record
  • Active Members decreased by 1% year-over-year to 12,285 in total
  • Live Flight Legs decreased 13% year-over-year to 15,389 in total
  • Net loss increased $12 million year-over-year to $101 million
  • Adjusted EBITDA was flat year-over-year with a loss of $49 million
  • Cash and Cash Equivalents fell from $586 million to $363 million

During its earnings call, Smith said Wheels Up would suspend full-year guidance in light of the program changes it is making.

However, both Smith and Thakran said the company remains committed to reaching Adjusted EBITDA profitability in 2024.

For active members, while small, the drop was a first for Wheels Up.

Wheels Up Active Members (as of March 31, 2023)

PeriodActive Members
Q1 202312,285
Q3 202212,668
Q2 202212,667
Q1 202212,424
Q4 202112,040
Q3 202111,375
Q2 202110,515
Q1 20219,896
Source: Wheels Up

Still, at the end of Q1, it has 12,285 active members, down from 12,668 at the end of 2022.

Smith said that with a reduced Primary Service Area, he is fine with a smaller but profitable Wheels Up.

Prepaid Block Sales

During the three months ended March 31, 2023, Prepaid Block sales (deposits for future flights) were $99.9 million compared to $174.6 million during the three months ended March 31, 2022.

According to its 10-Q filing, “The year-over-year decrease in Prepaid Block purchases was primarily attributable to normalization of supply versus demand for aviation services.”

Wheels Up Block Sales by Quarter (2021-23 by Quarter)

PeriodBlock Sales (in millions)
Q1 2023$100
Q4 2022$346
Q3 2022$151
Q2 2022$333
Q1 2022$175
Q4 2021$540
Q3 2021$172
Q2 2021$116
Q1 2021$69
Source: Wheels Up

The prepaid block, or jet card deposits in Q1, were down from $346 million in Q4 2022.

CFO Smith pointed to 2021, when it sold $116 million in deposits, as a better comparison to 2023.

Wheels Up Core Membership changes

According to the release about its Core membership, changes will mean “better pricing, performance, and member experience.”

It also means a large geographic reduction in where capped hourly rates will no longer apply. The new structure for capped hourly rates will cover two zones, an East and a West Zone.

The East zone will be east of the Mississippi and select areas of East Texas, including Dallas, Austin, San Antonio, and Houston. It will also include St. Louis, Milwaukee, Madison, Wisconsin, Toronto, Montreal, Nassau, and Marsh Island in the Bahamas.

The West zone will be Arizona, California, Colorado, Nevada, and Utah, along with Bozeman, Jackson Hole, and Sun Valley.

Wheels Up Primary Service Area (effective June 26, 2023)

Wheels Up service area

A flight within or between zones will be priced at capped rates.

For example, Phoenix to Las Vegas or Los Angeles to Dallas will have capped rates.

A flight from Los Angeles to Seattle would be priced dynamically.

The reduced primary service areas account for 80% of the company’s 2022 flying, the company says.

According to the release, “Wheels Up will continue to serve destinations outside of these primary service areas by leveraging the charter capabilities of its Air Partner subsidiary and our partner network. These flights will be dynamically priced at current market rates, and the company expects to continue to be price competitive relative to the broader industry.”

It adds reducing the primary service areas where capped rates apply “advance (the company’s) path to profitability.”

“The new programs take advantage of Wheels Up’s significant network density along the east and west coasts and are designed to complement the flying habits of the vast majority of its more than 12,000 members and customers,” the company said.

“These new programs represent a fundamental shift in how we are bringing our products and services to market to best serve our members and bolster our path to profitability,” said Mark Briffa, Chief Commercial Officer.

READ: You’re fired! Are you an unprofitable private jet flyer?

He added, “As Wheels Up has grown, we’ve seen that a one-size-fits-all pricing and geographic service model doesn’t reflect how our customers actually utilize Wheels Up or allow us to truly capture the operational and financial benefits of our scale.”

Briffa concluded, “By focusing our fleet in the areas where we have substantial demand and resource density, we are able to offer superior pricing, better service, and improve the efficiency and profitability of our operations – all while keeping the customer firmly at the center of everything we do.”

Earlier this year, the company launched a regional King Air program east of the Mississippi.

Other changes to Core membership.

In addition to the slimmed-down Primary Service Areas, there will no longer be capped hourly rates on large-cabin jets.

Also, King Air 350i capped rates will only be offered in the East region.

Both the East and West regions will continue with capped hourly rates on light, midsize, and super-midsize jets.

Last year, Wheels Up’s operators ranked as the third-largest private jet operator in the U.S. based on charter and fractional hours behind NetJets and Flexjet.

The release asserted, “Members will see lower prices across virtually all cabin classes, reflecting the operational efficiencies gained by a regionalized service strategy.”

The company said, “These two denser service networks should also drive an improved member and
customer experience
through faster recovery times, better on-time performance, and reduced operational complexity. Creating more predictable zones of travel will also help reduce repositioning and maintenance costs and improve overall profitability.”

The new rules go into effect on June 26, 2023.

However, a spokesperson says, “We will honor the terms of (existing members’) current plan either until funds are depleted, or the term of the agreement expires.”

Members can use funds for flights no longer covered by capped hourly rates via dynamic pricing.

Best of all, Smith says Core members can expect to see their capped hourly rates reduced.

Also, look for reductions in daily minimums. More to come.

Explaining the 3 types of Jet Card pricing

Meanwhile, a Wheels Up spokesperson confirmed their long-flight capped flight pricing continues based on the new zones.

The super-midsize long-flight discounts cap prices for flights between 3.5 and 4.4 hours at $29,995, plus a fuel surcharge and 7.5% FET. Longer flights are capped at $34,995, plus, plus.

Earlier this year, Wheels Up eliminated Los Cabos and all but a few major Canadian cities from its capped rate service area.

Wheels Up’s Delta Connection

Wheels Up said it will enhance its corporate outreach in conjunction with Delta Air Lines, which owns 20% of the private jet company.

The pair already have an extensive commercial arrangement.

Wheels Up customers can use funds to book Delta flights. They also earn high-level status in Delta’s SkyMiles loyalty program.

The extension of the partnership will provide Delta corporate accounts a combination of capped and dynamic pricing on Wheels Up without having to join a program, Smith tells Private Jet Card Comparisons.

Selling Non-Core Assets

During the Q1 analysts’ call, Smith said Wheels Up is looking to dispose of non-core assets.

He declined to provide more specifics.

Its acquisition of Air Partner included that group’s security, cargo, and airport consulting services. It also acquired a minority interest in seaplane operator Tropic Ocean Airways last year.

Wheels Up Executive Changes

Board Member Thakran, former Group Chairman, Asia for LVMH, and former Chairman and Founding Partner, L Catterton Asia, will serve as Executive Chairman.

Chief Financial Officer Smith has been named interim CEO, reporting to Thakran.

Wheels Up has retained a leading executive search firm to identify a permanent CEO.

Smith joined Wheels Up as CFO last June after serving in similar positions for several GE business units, including Gas Power Systems, Capital International, Healthcare Life Sciences, Capital Real Estate, and Commercial Finance.

In stepping down, Dichter said, “I would like to take this opportunity to thank our 12,000 plus loyal members and customers – and the incredible Wheels Up team – who have made the company what it is today. As we continue our path to profitability, this is the right time to take on a new role where I will support Ravi and Todd, and the business. I am looking forward to supporting Wheels Up as a shareholder, member of the Board, founder, and a strong advocate for our brand and mission.”

Additionally, Dave Holtz, Chairman – Operations, will take on an expanded role overseeing First, Second, and Third Party Flight Operations.

First Party is owned/leased aircraft, Second is managed airplanes, and Third Party is capacity accessed via other Part 135 charter operators.

C-Suite Turnover

Dichter’s resignation comes less than a week after CMO Lee Applbaum left.

Since its Investor’s Day presentation in February 2021, all of its most senior executives have now turned over. That includes then-CFO Eric Jacobs, COO Thomas Bergeson, and Chief Business Officer Jason Horowitz.

Vinayak Hegde joined Wheels Up as Chief Marketplace Officer in May 2021 before being elevated to President in October 2021. He exited in November 2022.

Still, Dichter continued to attract A-list talent.

Coca-Cola and Bank of America veteran David Godsman is to join as Chief Digital Officer, while former IBM executive Kristen Lauria replaces Applbaum as Chief Customer and Marketing Officer.

Kenny Dichter

Considered one of the industry’s best marketers, Dichter started Marquis Jet Partners in 2001 before selling to NetJets in 2010.

He then launched Wheels Up in 2013 with just three King Air turboprops.

That didn’t stop Dichter from punching above his weight. Within several years, he turned Wheels Up into the most searched brand next to NetJets.

Even so, Wheels Up did not operate aircraft until it acquired TMC Jets in June 2019.

It outsourced flying its King Air and Excel fleet to Gama Aviation Signature, which it also acquired. It was one of five operators Dichter bought, including Delta Private Jets, Mountain Aviation, and Alante Air Charter.

Wheels Up consistently beat revenue projections and more than doubled its memberships. However, it failed to hit bottom-line targets after going public in July 2021.

Like other SPACs, its share price was hammered, closing yesterday at just 49 cents after going public at $10.

Later this month, it will ask shareholders to approve a reverse stock split designed to prevent the New York Stock Exchange from delisting UP.

Last month, CNBC reported the company is also considering going private.

Warren Buffett on Wheels Up

During the Berkshire Hathaway annual shareholders meeting in Omaha on Saturday, Warren Buffett, responding to a question about NetJets, tweaked Wheels Up.

He told the audience, “12,600 people who have given them over a billion dollars on prepaid cards…and I think there’s a good chance some people are going to be disappointed later on.”

Now it will be up to Smith, Holtz, Briffa, who came via Wheels Up’s acquisition of Air Partner last year, where he was CEO, the new executives, and Delta Air Lines, Wheels Up’s largest shareholder, to figure out how to stem the losses, something the changes to its Core membership guarantees are designed to help.

Editor’s note: This story has been updated with additional information from the Wheels Up Q1 analysts’ call.

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