Delta Air Lines' led group to control 95% of Wheels Up after $500 million deal

After Wheels Up reported more Q2 losses last night, this morning, Delta Air Lines said it is leading a $500 million cash injection.

By Doug Gollan, August 15, 2023

After Wheels Up reported more Q2 losses last night, this morning, Delta Air Lines said it is leading a $500 million investment

After the market closed last night, Wheels Up reported more losses, declining revenues, and cash, with Reuters warning the company could seek bankruptcy protection based on its Form 10-Q filing. Then this morning, just after 9 am on the east coast, Delta Air Lines announced it was leading a major investment into the third-largest U.S. private jet operator based on charter/fractional flight hours.

It announced a non-binding agreement for a $500 million facility to Wheels Up that includes funds contributed by the airline, and CK Opportunities Fund, I LP, which is co-managed by affiliates of Certares (owner of Internova, one of the largest groups of luxury and corporate travel agencies) and Knighthead.

The facility would be comprised of a $400 million term loan and a $100 million liquidity facility from Delta, totaling $500 million to Wheels Up.

“The partnership will create new opportunities for Wheels Up to drive strategic, operational, and financial improvements for its customers in the months and years ahead,” said Delta CEO Ed Bastian.

He added, “Delta’s unmatched expertise in premium travel, customer loyalty, corporate sales, operational reliability, and aircraft maintenance, combined with Certares’ and Knighthead’s experience and global reach, are expected to speed Wheels Up on its path to profitability.”

As part of the announcement, Bastian said, “I would like to extend my sincere gratitude to Kenny Dichter, the visionary founder behind Wheels Up, for building the Wheels Up brand into a powerhouse in private aviation. We have great appreciation for his steadfast devotion to the members, customers, and employees and his role in elevating the private aviation experience, which will undoubtedly guide the industry’s path forward. We’re grateful he will continue as Wheels Up’s strategic advisor,”

Delta Air Lines, which sold its Delta Private Jets unit to Wheels Up in 2020, was the largest shareholder with a 20% stake prior to today’s news. It and the other new investors will now control 95% of the company.

Delta CFO and CEO
Delta Air Lines is leading a $450 million cash investment into Wheels Up as its CFO Dan Janki becomes Chairman of Wheels Up. Pictured right is Delta’s CEO Ed Bastian.

Delta’s CFO Dan Janki replaces Ravi Thakran as Wheels Up chairman, and Todd Smith continues as CFO and Interim CEO.

Both Smith, who joined Wheels Up in 2022, and Janki, who came to Delta in 2021, are longtime veterans of GE.

Since May, both CNBC and The Wall Street Journal had reported Wheels Up could file for bankruptcy.

Most importantly, Wheels Up members, who would have been unsecured creditors in bankruptcy, will keep their fund credits and can continue to fly under their current program rules and pricing.

Its latest financials showed at the end of June showed members had prepaid $828 million for future flights.

Since 2020, two other top 20 private jet operators – JetSuite (in 2020) and Jet It (in May of this year) both collapsed.

In fact, the release noted, “The company’s audit committee determined that the delay that would be caused in obtaining stockholder approval would jeopardize the company’s financial viability and the deal is being announced, “without prior shareholder approval based on the Financial Distress Exception provided for in the Shareholder Approval Policy of the New York Stock Exchange.”

Delta is ready when you are

Delta signaled its interest in keeping Wheels Up flying in May.

First, it launched a new sales program pitching Wheels Up flights to its roster of corporate accounts.

Then during a Q&A at the Wings Club in New York, Delta CEO Ed Bastian, was asked if he regretted the deal to sell his Delta Private Jets unit to the private jet flight company.

Bastian surprised many as he instead issued a gushing endorsement.

His comments came days after it was announced Dichter was stepping down from his executive roles, although he remains on the board.

The Delta CEO told CNBC’s Phil Le Beau, “Not at all. I won’t talk about the stock, and they are not unlike many SPACs. People talk about trouble, with it tends to be more stock related.”

He continued, “The relationship is strong. I think Kenny [Dichter] has done a masterful job over the last decade building a high-quality brand, great experience, (with) a lot of new members, and for us to be able to add that to our stack is the premium opportunity within the Delta experience, well no one has ever been able to do that before, and we have been attempting to pull that off.”

Bastian further added, “It’s paying up in meaningful ways…If you think the places WU has strength in places, we may not have natural strength in.”

Wheels Up members can use deposit funds to buy tickets on Delta.

Additionally, they can earn miles and status in its SkyMiles loyalty program, bringing to the airline highly sought-after high-yield travelers.

Now there could be synergy with Certares’ Internova Travel Group, which has over 100,000 travel advisors who generate over $5 billion in sales.

Wheels Up Q2 2023 Financials

The rescue from Delta appears to have come just in time as Wheels Up reported more losses, decreased cash, and a $237 million drop in fund sales, deposits by members for future flights.

Q2 highlights

  • Revenue decreased 21% to $335 million year-over-year from $425 million
  • Active Members decreased by 8% year-over-year to 11,689
  • Live Flight Legs decreased 16% year-over-year to 18,137
  • Net loss increased $68 million year-over-year to $161 million, including a $70 million non-cash goodwill impairment charge
  • Adjusted EBITDA dropped 14% year-over-year from $47 million to $40 million
  • Cash and Cash Equivalents fell from $363 million to $151 million

Wheels Up’s quarterly earnings report showed that it had just $96 million in block sales in Q2 compared to $333 million during the same period in 2022.

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

Period Block Sales (in millions)
Q2 2023 $96
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

At the same time, active members dropped for the second straight quarter, this time by 8%.

The company attributed that in part to the changes to its primary service area, announced during its Q1 earnings call.

At the time, it said its consolidated PSA would impact 20% of flights.

Wheels Up Active Members (as of June 30, 2023)

Period Active Members
Q2 2023 11,639
Q1 2023 12,285
Q3 2022 12,668
Q2 2022 12,667
Q1 2022 12,424
Q4 2021 12,040
Q3 2021 11,375
Q2 2021 10,515
Q1 2021 9,896
Source: Wheels Up

In the announcement, Smith said, “Wheels Up sincerely appreciates the unwavering support of so many of our members and customers.”

He added, “Over the past few months, we have been intensely focused on taking clear steps to improve our product offering and our operational delivery. Those actions are already showing results, and we look forward to continuing and accelerating that progress with the support of our new partners. Our continued close work with the Delta team will enable us to further integrate our digital experiences, member benefits, and our operations. We are extremely grateful for Delta’s support and look forward to welcoming our new partners, including Certares and Knighthead, to the Wheels Up family and leveraging their expertise to further enhance our services and member experiences.”

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