Wheels Up names Delta board member Mattson as CEO

Delta Air Lines Board Member George Mattson becomes Wheels Up’s new CEO following the appointment of Delta CFO Dan Janki as Chairman of the private jet flight provider.

By Doug Gollan, September 14, 2023

Wheels Up today announced George N. Mattson as its new Chief Executive Officer. It comes after announcing an ownership agreement with Delta Air Lines, Certares Management LLC, and Knighthead Capital Management LLC on Aug. 15, a deal that is expected to close subject to customary conditions and approvals.

Mattson, who will officially start next month, has been a member of Delta’s Board of Directors since 2012. He previously served as a partner and co-head of the Global Industrials Group in Investment Banking at Goldman Sachs & Co. from 2002 to 2012, during which time his responsibilities included oversight of the Transportation and Airline practices. Since 2014, he has been the lead investor and Chairman of Tropic Ocean Airways, a large operator of seaplanes. Tropic Ocean Airways is a Wheels Up partner.

“George is an exceptional business leader whose background will be instrumental to the continued success of Wheels Up,” said Delta CEO Ed Bastian. “With new leadership in place, Wheels Up is well-positioned to drive strategic, operational, and financial improvements for its customers and stakeholders in the months and years ahead.”

George Mattson, Todd Smith
Incoming Wheels Up CEO George Mattson (left) and Interim CEO Todd Smith, who will continue is his CFO role.

“I look forward to working with George as he brings his expertise and leadership to Wheels Up,” said Dan Janki, Wheels Up Chairman and Delta’s Chief Financial Officer. “I would also like to thank interim CEO Todd Smith for his leadership through this period of transition at Wheels Up. The changes made during his tenure are expected to stabilize the business and will help drive future profitability and an elevated experience for our members. Todd will continue his work as Wheels Up CFO.”

Mattson will be based in Atlanta, home to the recently opened Wheels Up Member Operations Center, which centralizes all of the company’s operational functions. Mattson’s first official day is expected to be in early October.

The benefit is if we can be more efficient and more reliable, we can performance-wise and cost-wise deliver that benefit to our customers. And so that was a decision that needed to be made

– George Mattson, newly appointed CEO of Wheels Up

Through June, Wheels Up ranked as the fourth largest North American private jet operator based on charter and fractional flight hours. It had over 11,000 members members at that point.

The following interview with Mattson and Smith was conducted under embargo prior to this morning’s announcement.

Private Jet Card Comparisons: To start, can you give a top-line overview of the discussions and Delta-led Wheels Up deal?

Mattson: Delta has had a prior pre-existing history with Wheels Up. As you know, Delta sold its private jets business to Wheels Up about three years ago for a combination of cash and stock, and in the process of executing that transaction, (currently) owns 20% of Wheels Up. We put in place a number of partnerships and collaborations around customers (including Delta’s) SkyMiles program and such. That had gotten going, but also, to some extent, had gotten diverted by the COVID-19 pandemic and the shock to the system that that resulted in. As Wheels Up began to have its challenges earlier this year and into the summer (there were discussions) with Delta about being part of a financing and a deeper partnership to help the company move forward. That culminated in the announcement (of the) transaction in which Delta, Certares, and Knighthead were going to put up to $500 million of capital and, in the process of doing so, owning 95% of the company’s shares on a pro forma basis.

PJCC: Why was it the deal is for 95% of the company instead of just taking it private with 100%? Is there a next step where you tender for the last 5%?

Mattson: There were some technical reasons that the transaction was structured that way. We can’t comment, obviously, on the future ownership structure of the company. What we do know is that post the closing of this transaction, we’re going to be a public company and conform and comply with all the typical public company (rules). And yes, 95% of the shares will be owned by the new shareholders, but beyond that, we’re not able to comment further.

PJCC: Skeptics question the rationale of the deal – the why?

Mattson: Delta sees this as an opportunity to expand and extend its offerings to its premium customers, both corporate and high-value, high-net-worth individuals. The opportunity that we see strategically together is something that hasn’t really been done in aviation before. It is the opportunity to seamlessly integrate for the customer, even though we’re separate companies in historically separate ecosystems of commercial aviation and private aviation. As you know, 90% or so of the people who can afford to fly private haven’t flown private. We still have a lot of people who haven’t adopted it yet. Premium travelers aren’t commercial premium or private premium. There are a lot of people who bounce back and forth trip by trip, need by need. We want to sit at that intersection and offer our customers collectively, both sides, more choices, and integrated options. And so, at the customer level, that’s where Delta sees it.

…if you go back 15 years, the idea of a zero-cancellation day at a mainline airline was unheard of. Never happened. And now (Delta has) 250 of them a year

– George Mattson, newly appointed CEO of Wheels Up

The other thing that Delta sees is an opportunity to really help Wheels Up realize its goals in delivering operational reliability and operational excellence. The thinking around the positioning of the company and the brand going forward really is centered around recognizing that customer experience has to be underpinned by safety first, operational reliability, and predictability. Those are non-negotiable things. This journey for Wheels Up has already started. It’s not starting with Delta’s investment or my appointment. It’s a journey, and it’s a journey we’re going to take and put a ton of focus on in the coming months and years. It’s leveraged by Delta’s capabilities and the Delta playbook if you will. Delta wasn’t always viewed as the most reliable airline. It was a journey that started after the Delta-Northwest merger and has taken a decade. But if you go back 15 years, the idea of a zero-cancellation day at a mainline airline was unheard of. Never happened. And now (Delta has) 250 of them a year or so. Things that haven’t been done or weren’t thought possible, you know, can happen. And that’s the kind of mindset and attitude we want to take to deliver a new reality for operational excellence and performance at Wheels Up.

READ: A Brief History of Airlines and Private Jets

PJCC: You are on the Delta board. You have very deep M&A and board experience. In terms of your appointment as CEO, is this something akin to Bob Iger returning to Disney for two years to clean things up and then handing over the reins to somebody else?

Mattson: This is a long-term appointment. It’s a permanent position. I’ll serve in it as long as my board and my shareholders want me to. I don’t have any plans to go do anything else until this work is done and fixed and we’re where it ought to be. So, no timeline for that.

PJCC: Will you stay on the Delta board as part of this?

Mattson: That is a question that’s evaluated and discussed by the Delta board.

PJCC: Do you have a 90-day or first 100-day plan, or is it a continuation of the plan Wheels Up already announced in May?

Mattson: I’m absolutely going to build off and leverage all the great work that Todd and the rest of the team have done. I’m coming into a movie that’s already playing; I’m not starting a new movie here. Having said that, I intend to do is spend the first 30, 60 days listening and learning and really diving into the big chunks of the business. That’s going to match up well with the work that we would be doing this time of year anyway to build a strong annual plan for next year, which will be granular and detailed and have goals and tasks. My second parallel is to spend a lot of time out with current members and prospective customers and understand the experience they’ve had, the direction they want to go, and rebuilding momentum on the commercial side of our business, which has always been very strong but has hit a little bit of a pause button here as there was uncertainty around the future of Wheels Up, which this announcement of the capital injection and also the leadership clarification should really restore confidence among current and prospective members and-and customers to reengage with us or to more fully engage with us. I think we’re going see a strong response on the commercial side of the business from the marketplace in that regard.

PJCC: The financial issues at Wheels Up with the amount of money prepaid for future flights versus available cash, and the Financial Times report on Vista Global really highlighted the question of what happens to customers’ money once they join one of these programs. Some providers do have escrow accounts to protect customer funds until customers fly. In addition to just the Delta investment, have you been thinking about making any changes to how you handle deposits as opposed to just putting them into operating funds?

Smith: We have looked at it, but our current thinking is that we’ll continue in a consistent manner that we’ve treated the block funds historically. A lot of what we’re trying to achieve is just a more balanced revenue mix and a more appropriate product mix with regard to the business. And we think that as we get to something that looks closer to a 50-50 balance between on-demand charter business and our programmatic offering, then that puts us in a strong position to have the right flexibility in terms of being able to operationally deliver. It clearly supports our profitability objectives. We still very much believe that there is value in that programmatic offer, and our customers will see that value and they will support the block funding program in a way that we have today.

PJCC: Some private flight providers keep program deposits for future flights in a segregated account, which, if they need the money, it’s still available for operations, so it doesn’t offer any real protection for the customer. But at this point, are you making any changes in terms of how you are going to use block funds?

Smith: We’re not looking at making any changes at this point. The best thing that we can do for our customers is this new capital, which we believe underpins real confidence in the business. It gives us the runway and the financial support that we need to execute the business turnaround plan. The announcement (of the deal) has been incredibly well received by our customers and members, who were certainly pulling for us but, at the same time, had some uncertainty and concern. This has really restored that confidence, and now we’re off to the races and working hard to deliver on those business outcomes that we’ve committed to.

Mattson: I would add airline business models have generally relied on people paying for tickets before they fly, whether it’s in the commercial space or the private space. Obviously, everybody in the mainline area, Delta included, has a significant air traffic liability, which is like the member deposits. The key for us as a management matter is to make sure we’re running an operation that is sustainable financially and not relying on that as a bank account for funding operating deficits. I can tell you there will be a sharp focus on not relying on that as a crutch to mask or offset the things we need to be doing to execute profitably in the operation.

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

PJCC: For customers who are attracted by the programmatic options with fixed or capped hourly rates and availability guarantees, what is the future of those programs considering the reduction in the areas you are offering them that was implemented back in June?

Smith: Each of our members has a period where the existing rule set that was in place when they signed up, and we’ve said very clearly as we make changes or transitions, we will continue to honor those obligations until they expire or the customers deplete their funds. Beyond what we’ve announced, we don’t have any wholesale changes or anything that’s significant, but we are working through that transition. We’ve seen some early returns that are very positive around the additional efficiencies that come from flying in those denser regions. We’re working very hard to make sure that we support our customers who are in those extended coverage areas that we may no longer cover on a programmatic basis to make sure that we’re giving them market-competitive offerings on an on-demand charter basis. We’re really investing in growing that capability and doubling down on (charter broker) Air Partner’s expertise from our team there and making sure that we continue to cover the entire geographic area within the U.S.

Mattson: When you look at the concentrations of our members on the Eastern and Western Seaboards, and you think about the densification and efficiency that we were able to create in the programmatic piece of the business by narrowing still pretty big areas of guaranteed coverage, that trade made a ton of sense. The benefit is if we can be more efficient and more reliable, we can performance-wise and cost-wise deliver that benefit to our customers. And so that was a decision that needed to be made.

PJCC: Are there any sales promotions in the pipeline either now or when the deal closes?

Smith: Nothing specific now. As we always do, we’ll continue to evaluate that and make sure that we are still having highly competitive products. We’re just focused on delivering with that renewed confidence and making sure we capitalize on it, and positioning for a really strong fourth quarter.

PJCC:  Certares owns a large group of travel agencies. Do you have any updates on plans to work with them to sell flights on Wheels Up?

Mattson:  They own a whole number of assets (that are relevant). We definitely are going to sit down with them and figure out ways with their portfolio of businesses to leverage that relationship further. So, in addition to Delta, where it’s pretty obvious, I would say there are lots of opportunities with Certares as well. And this is right in their wheelhouse.

PJCC: Are there any updates on the Airshare deal or other divestitures?

Mattson: We are very much working through that closing process with Airshare. That’s on track and progressing well. We’re targeting a closure date there toward the end of this quarter or early next quarter. We’re very happy with that transaction. To your broader question, we’re not going to comment on things that haven’t been negotiated or announced, except everything that we’re looking at is around how we continue to strengthen the business in line with the program changes we’re making. We previously mentioned we’re looking at the fleet composition and the aircraft and making sure we’ve got that position at the right level.

PJCC: Talking about the fleet, you announced the King Airs will be available only East of the Mississippi and parts of Texas as a programmatic offering. There are folks who say the King Air fleet doesn’t make sense, full stop, period. It won’t work financially in the type of offering you have. Do you want to say anything in defense of the King Airs or where you see the King Air fleet fitting in the future?

Smith: We believe in the King Air. We think there’s an opportunity to fly the King Air successfully, and we think it’s a valuable and attractive product for our members. That being said, part of the announcements that we made earlier this year was in recognition that the way we were flying the King Airs, offering them on a nationwide guarantee availability program, did not work, and we needed to make changes there. Relocating that product offering to the East Coast is very much consistent with that. There is a lot of attractiveness in the market for an entry-level private travel option that seats eight people and has the capability to do some of these shorter routes, particularly in the Northeast and the Southeast. We’re also looking at some options to use them a bit more in the charter fleet for some very specific and targeted routes. I believe that the King Airs can be profitable.

PJCC: What about the grand vision of being an Expedia, Airbnb, a digital marketplace for the long tail of charter operators?

Mattson: Wheels Up recently hired a new head of digital, David Godsman. David is going to be a tremendous leader in helping us build our IT and digital strategy. We’re just getting started on the broader strategy. The key areas of focus right away are going to be making sure that our IT and digital strategy are supporting our core business and our core customers and products, making sure that our team has the business tools to make good business decisions in operating the business. That’s fleet planning, dispatch, flight profitability, tail profitability, et cetera. And so, we’ve got some work to do internally to give our team the tools they need to be best-of-breed IT business analysis tools that exist at other airlines that I’m familiar with, and so that would be an area of focus. The second area of focus is to make the customer experience more exceptional and more seamless digitally. Broader initiatives, the marketplace, we’re going to continue to look at and evaluate and save for another day. Our near-term focus is important areas that underpin our ability to execute in our operation and for our customers. I really want to kind of narrow the focus initially to make sure we nail that before you take on broader and more ambitious goals.

READ: The digital private jet charter booking revolution is still delayed

PJCC: Talking about immediate goals, $500 million sounds like a lot of money. But it depends on how much you’re burning. The naysayers point to how quickly Wheels Up has been going through money (Delta has advanced Wheels Up $60 million since announcing the deal in August). For the people who put down $100,000 or $200,000 or are considering it, what’s behind the $500 million to give them the confidence to put their money down?

Mattson: The $500 million is sufficient to execute the plan. There are lots of opportunities to drive efficiencies, cost synergies, and revenue that are part of the future that weren’t part of the past until we were able to align with Delta and our other partners through this transaction much more closely.

Smith: Just ingesting the capital restores (the confidence that) allows us to drive blocks and continue to utilize that as an additional funding source. But at the same time, what this is about is how we drive business operations and improvement. We’ve spent a lot of time developing this plan, thinking about the change to the product strategy, and thinking about the operational improvement that we believe with conviction that we can deliver. The most powerful statement here to the market is that we have three very sophisticated investors, Delta, Certares, and Knighthead, who also reviewed and evaluated that plan and are confident as well in the opportunity that exists here. Hopefully, our customers see and feel that as well. And we’re working hard every day to prove it to them. There’s also a level of granularity that we’re obviously not going to go into here. But there’s a level of granularity to the plan in terms of resources and support from Delta operationally and commercially.

PJCC: Can you give a little bit more on that, what you’re talking about?

Smith: If you think about the main functional areas that we’re going after here, it’s not a secret that Delta has one of the preeminent tech ops maintenance capabilities in the world. We are going to make sure as we’re going through our maintenance strategy and our maintenance improvement plan that we are benefiting and leveraging from the broad capability and the human beings who will be helping us go through the rest of the operations. On the commercial side, Wheels Up is primarily an individual/leisure membership community today, 85-ish, 90%. We have a significant opportunity with Delta’s help to rebalance our commercial mix to be more balanced between leisure and -corporate/small and medium-sized businesses. Our fleet is a lot busier on Fridays and Sundays than it is on Tuesday and Wednesday mornings, and so there’s an opportunity to demand balance through the week, days of the week, with Delta’s help by building quickly off their 500-person sales team with thousands of corporate customers as a base of corporate business we don’t currently have. Those are a couple of operational and commercial examples, but there’s a discreet list of things that we’re going after day one and goals and plans around them.

PJCC: Wheels Up was hamstrung by trying to integrate five different charter operators you acquired during Covid, and that hampered operations and certainly recovery flights when there were issues. When I visited the MOC in Atlanta and interviewed (Chairman of Operations) Dave Holtz earlier this year, he shared some improving metrics in terms of being on time and other performance metrics. Are there any updates?

Smith: We’ve been very much focused on driving improvement in those areas, in particular, the controllable interruption rates, the on-time departures, completion rates, and, quite frankly, the customer satisfaction scores. Having served in the interim CEO role for the last four months, I end up taking a lot of those calls if we do have issues. And I can tell you that we have consistently been making improvements on them and making sure that we’re delivering a better experience. The MOC has allowed us to have all those resources together to get better visibility of that activity and track it in a more centralized way, and make it visible to our teams so they can see it on the boards. And you would’ve seen some of the technology there.

PJCC: Is there anything that we haven’t talked about that you think is important or that you want to cover?

Mattson: (The deal) is a great new chapter for Wheels Up, which has in many ways been, notwithstanding its current challenges, a success story of taking a company from startup zero to one of the largest and best-known private aviation companies in the world with a great brand, and a loyal member community. The company ran into some challenges. You could argue that they were victims of their own success and outran their ability to manage it sufficiently, which is obviously absolutely critical in any business, but especially critical in the airline business. We’re going to build off of that success from the past, take everything we can from it, and take it forward into a new chapter, which is really going to be underpinned by sustainability of performance, sustainability financially, and operational excellence, which has to underpin any consistently excellent customer experience. And those two things are inextricably linked, and we are never going to be losing sight of that. That’s going to earn us the right to grow again and to be even more successful in the future.

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