Wheels Up answers new reports of bankruptcy after stock falls 60%

Stock price for Wheels Up dove from $3.13 to $1.24 today after reports it hired restructuring lawyers from Kirkland & Ellis.

By Doug Gollan, June 23, 2023

The share price for Wheels Up dove from $3.13 to $1.24 today after reports it hired restructuring lawyers from Kirkland & Ellis

Wheels Up is again trying to stave off inferences that it plans to seek bankruptcy protection.

Earlier today, The Wall Street Journal reported Wheels Up had hired lawyers from Kirkland & Ellis LLP who specialize in restructurings.

Trading of Wheels Up’s stock was briefly suspended when it dropped by 49% after the news.

“Wheels Up continues to progress with redesigned programs to better serve its members and customers in support of our path to profitability. As we execute our vision and the associated strategic plans, we are working with a number of advisors and industry participants around securing new strategic investments, raising capital, and executing previously disclosed strategic divestitures,” the company said in a statement.

Wheels Up

The stock closed today at $1.24 after opening the day at $3.13. It fell as low as $1.10 per share.

Earlier this month, the company completed a reverse split raising the price above $1 per share to avoid being delisted by the New York Stock Exchange.

Bankruptcy reports

On April 28, CNBC reported Wheels Up was considering various restructuring options.

According to the business channel, the third-largest U.S. private jet operator was “talking to advisors about a range of alternatives, maybe going private, maybe getting a cash infusion from Delta, which has a 20% stake in Wheels Up, or some kind of restructuring,”

On May 10, Wheels Up issued a statement that it was not considering bankruptcy. It came after an additional report by CNBC that the private jet company was consulting restructuring attorneys.

Two days earlier, on May 8, Wheels Up announced its Founder and CEO, Kenny Dichter, was exiting. It also announced a large reduction in the area; it offers guaranteed rates ahead of Q1 earnings.

The earnings call showed significantly less cash (down to $363 million from $586 million in Q4) and more losses.

READ: House of Jet Cards: Evaluating the risks and rewards of a multi-billion-dollar private jet charter product

At its annual shareholders’ meeting on May 6, the previous Saturday, Berkshire Hathaway CEO Warren Buffett, responding to a question about NetJets, added, “(Wheels Up has) 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.”

However, Buffett’s private jet company, the world’s largest, is now having its own issues.

Yesterday its pilot union, which is seeking to renegotiate its contract, filed a grievance alleging “systemic deficiencies” in training.

NetJets is failing to provide adequate and standardized training across all segments of the pilot group from its newly hired pilots who are completing initial aircraft training to crewmembers who have been on property for decades and are completing new aircraft transition training,” NJASAP said in a press release.

Delta backs Wheels Up

Wheels Up has been getting verbal backing from Delta, which is its largest shareholder.

On May 17 at the Wings Club in New York, Delta CEO Ed Bastian voiced support for Wheels Up.

He said of the relationship, “It’s paying up in meaningful ways. First of all, people put their money on Wheels Up. They can use that same money on Delta in terms of the block sales. If you think the places Wheels Up has strength in places, we may not have natural strength in.”

Ed Bastian, Delta CEO
Delta CEO Ed Bastian voiced support for Wheels Up last month at the Wings Club in New York.

In its Q1 earnings call, Wheels Up announced a new partnership with Delta targeting the airline’s corporate customers to buy flights from the private jet company.

In fact, Wheels Up executives referenced Delta 10 times during the call.

READ: What happens to your jet card and private jet membership deposits?

Wheels Up CFO and Interim CEO Todd Smith said on the call, “Delta has a terrific business with a number of corporates in terms of commercial travel. Now we’re able to also offer those same customers the opportunity to access Wheels Up. And I think that combination is something that’s really unique in the market, gives their teams the competitive advantage, and hopefully leads to more growth in the area that we’re really targeting, which is expanding our own corporate business.”

Speaking at the Jefferies Business Aviation Conference on June 13, Smith told the audience he wasn’t concerned with liquidity.

He said the company had “more options,” continuing, “If we…get to the point where we need to raise funds if needed.”

It has already announced plans to raise money by selling non-core businesses.

Wheels Up’s plan

Wheels Up executives believe its slimmed-down primary service area, where it guarantees rates, will help it become profitable.

At the same time, it is hoping to attract new members and retain existing clients via lower prices.

After dropping 5.2% in Q1, average jet card hourly costs were still 25% higher than at the end of 2020.

Rising prices are the number one reason (62.4%) consumers say makes them want to change programs.

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

Earlier this week, in launching a new jet card program, FlyExclusive added surcharges ranging from $4,000 to $7,000 for flights to and from Oregon and Washington, two states where Wheels Up is abandoning capped. rates.

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