November 19, 2024
With the Delta Air Lines funding deal signed, Wheels Up confirmed its commitment to honor capped rates for legacy members in the pre-June 26 primary service area.
When Wheels Up announced a reduced primary service area where it offers guaranteed capped hourly rates in early May, it said it would honor existing member contracts.
The new, reduced primary service area went into effect on June 26.
While the restructured program gives flyers in the new PSA (map below) lower capped rates, outside-the-zone flights are priced dynamically.
“We intend to fully honor those (legacy) agreements”
– Todd Smith, Wheels Up Interim CEO
That enables Wheels Up to factor in repositioning and eliminates guarantees on availability and no-surcharge recovery.
However, in an interview this afternoon, Interim CEO and CFO Todd Smith told Private Jet Card Comparisons that following last week’s close of new financing from Delta Air Lines and investing partners, Wheel Up remains committed to honoring the terms of contracts signed before the change was announced.
It means members who had agreements in place before the May 9, 2023 announcement can continue using funds for capped rate flights in the pre-June 26 nationwide primary service area with the guarantees they signed up for.
That includes large swaths of the U.S. from the Mississippi River west to Colorado and Arizona and in the Pacific Northwest, which is not part of the new PSA.
Those legacy members can fly under capped rates in the former PSA until their pre-May 9th funds expire or their rate lock ends, which could be up to 24 months.
It includes requesting King Air 350s in the West.
As part of the program restructuring, the King Air program will only have capped rates in Texas and east of the Mississippi, except in areas of Wisconsin and Northern Michigan.
“We intend to fully honor those (legacy) agreements,” Smith said.
He said reports to the contrary are incorrect.
Smith said the expectation is legacy funds being used outside the new PSA will be run off by the middle of 2024.
He added that Wheels Up will increasingly transition to vetted third-party operators in the former PSA as it focuses its fleet on the new area, which has a higher density of customers.
At some point, he said, it may offer members in those former capped rate areas the option of refunds instead of possibly flying them at a loss. However, he added, “We are not there yet.”
During the surge in demand in 2021 and 2022, a number of programs refunded deposits instead of taking losses on contracted rates, implemented surcharges, or used force majeure and other clauses in their contracts to impose new terms and rates on short notice.
Wheels Up, in fact, gave new and existing members several weeks to lock in legacy terms before implementing new prices and terms.
While it helped the private flight provider raise much-needed cash, it delayed the impact of the price increases and other adjustments.
The May 2023 announcement eschewed that approach, implementing the new terms for subsequent deposits from existing members and new members right away.
After Wheels Up closes its previously announced sale of its management business to Airshare, it will still have 215 owned and leased airplanes remaining, according to its 10-k filing.
Through June, Wheels Up ranked as the fourth-largest operator in North America based on fractional and charter hours per Argus.
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