Wheels Up closes Delta-led takeover to avert possible bankruptcy

The Delta Air Lines-led $500 million rescue package is part of the airline’s strategy to make Wheels Up an integrated part of its consumer offering.

By Doug Gollan, September 21, 2023

Delta Air Lines and Wheels Up have closed their deal, which will see a group of investors led by the Atlanta-based airline gain 95% of the loss-making private jet flight provider.

“This investment represents both an important source of capital for Wheels Up to support our strategy for financial stability, future profitability, and long-term growth on behalf of our members and customers, as well a vote of confidence in our path forward from a group of investors with deep experience in the premium travel space,” said George Mattson, a Delta Board Member who was appointed CEO of Wheels Up last week.

He added, “We look forward to working closely with Delta and our other investors to deliver best-in-class operating performance and an exceptional customer experience, which, as we deepen our commercial partnership, will also enable us to provide a one-of-a-kind seamless connection between private and premium commercial travel.”

After battling deepening losses since its July 2021 IPO, dwindling cash, and persistent bankruptcy rumors since the Spring, the financing provides the fourth-largest private jet flight provider a lifeline.

Delta has loaned Wheels Up $70 million since early August, including $10 million on Sept. 14.

Delta, with Certares, which owns Internova, one of the nation’s largest luxury and corporate travel agencies, restructuring specialist Knighthead, and now Cox Enterprises, will provide a $500 million credit facility to Wheels Up.

The credit facility comprises a $350 million term loan funded at closing from Delta, CK Wheels LLC, and Cox and a $100 million revolving credit facility from Delta.

An additional $50 million

The credit agreement terms permit a new lender to provide a $50 million term loan after the closing date, as approved by Delta, Certares, Knighthead, and Cox.

It is anticipated this additional funding will close in the near term.

In connection with the closing of the credit facility, the lenders will initially receive newly issued Wheels Up common stock representing 80% of the company’s outstanding equity as of the closing of the credit facility on a fully diluted basis.

After approval by Wheels Up’s stockholders of an amendment to its certificate of incorporation, the company will issue to the lenders additional new shares such that the lenders will own 95% of the company’s outstanding equity as of the closing of the credit facility on a fully diluted basis.

Delta’s Wheels Up Strategy

During an interview with Private Jet Card Comparisons after being named CEO, Mattson told us, “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.”

He continued, “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 commercial and private aviation ecosystems.”

If successful, it could benefit the entire industry.

Mattson noted, “Ninety percent 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.”

READ: Exclusive Q&A with new Wheels Up CEO George Mattson

Delta and Wheels Up recently unveiled joint advertising on ESPN College GameDay, Monday Night Football, and the SEC on CBS.

The airline is a sponsor of the Olympics and has a number of high-visibility platforms to promote private aviation, such as the Delta Center in Salt Lake Center, home of the Utah Jazz.

It is also a sponsor of the Olympics and Team USA.

Earlier this year, Wheels Up said Delta’s 500-person salesforce would be selling private flight solutions to the airline’s thousands of corporate accounts.

Over 95% of consumers who started flying privately since Covid are sticking with it, according to the soon-to-be-released 2023/24 Jet Card Report by Private Jet Comparisons.

As part of today’s announcement, Delta CFO and Wheels Up Chairman Dan Janki said, “Wheels Up is an integral part of Delta’s portfolio of premium partners, and this deep relationship offers a significant opportunity to deliver compelling benefits to our customers that are unique in the travel space.”

He added, “This investment and new leadership puts Wheels Up on a strong path to future success.”

New Board of Directors

Wheels Up also announced a new structure for its Board of Directors.

Under the new structure, Delta Air Lines will appoint four directors.

Certares and Knighthead each will appoint two directors. Cox will appoint one director.

In addition, one company executive will join the Board, and two independent directors are expected to remain from the previous Board.

No further details were available at press time.

Last month, Janki was appointed Chairman of Wheels Up.

Mattson is set to take the reins as CEO next month.

Davis Polk, Jefferies LLC, Kirkland & Ellis, and PJT Partners were strategic advisors in the deal.

READ: A brief (and surprising) history of Airlines and Private Jets

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