Everything you need to know about Wheels Up 2.0

What does the future look like at Wheels Up? From programs to operations, sales, marketing, and fleet, here’s what to expect.

By Doug Gollan, October 20, 2023

About a mile from the bare bones meeting room at the Las Vegas Convention Center where Wheels Up top executives were holding court earlier this week during the National Business Aviation Association conference, conducting media interviews, the rock group U2 was also taking center stage at the city’s newest attraction, the Sphere, wooing fans with hits such as Beautiful Day and I Still Haven’t Found What I’m Looking For. Both tunes provide a good summary of where the private flight provider now sits.

It’s a Beautiful Day, having narrowly avoided bankruptcy after Delta Air Lines led a $500 million rescue package that gives the investor group 95% control, including a 40% stake for the Atlanta-based airline. There were over $800 million in advance payments from customers, who would have been unsecured creditors.

But as Bono sings, “Don’t let it get away.”

With net losses last year averaging over $1.5 million per day, there is still a lot of work to do. In Q2 of this year, net losses were $1 million per day, excluding a $70 million non-cash goodwill impairment charge.

Most of all, it’s not sure that new management has found what they are looking for, clearly cutting the losses before the money again runs low.

Corny leads aside, here are the highlights from a wide-ranging discussion with new CEO George Mattson (center), Chief Financial Officer Todd Smith, who served as Interim CEO since May, and recently appointed Chief Customer and Marketing Officer Kristen Lauria.

On Operations

Wheels Up customers should expect improved operations.

Gone are the days of grandiose plans to create a digital marketplace trying to solve issues that haven’t been solved for the last two decades.

George Mattson, the former Goldman Sachs and IBM executive and Delta Board Member who is now CEO of Wheels Up, didn’t mince words about where he wants the company focused.

Wheels Up struggled more than other flight providers in battling Covid operations challenges.

I believe we can do this, that we are going to become the best-operated, best-run private aviation company around

– George Mattson, CEO, Wheels Up

It was trying to merge the operations of TMC Jets, Gama Aviation Signature, Mountain Aviation, Alante Air, and, of course, Delta Private Jets, the operators it acquired.

It was a mishmash of managed, owned, and leased aircraft, each with its own dispatch centers. And even where there was commonality, a pilot for one operator can’t just fly that same aircraft type for another per FAA rules, even if they were both owned by Wheels Up.

Focus on Reliability

Mattson says, “We have a very finite list of things we’re focused on really drawing down on and driving hard. One is, obviously, operational reliability and performance. I’m sitting now in week three (and the daily) discussions (are) around the operation, lots of discussions around continuing and accelerating the journey, which had already started long before I got here, to improve the operation. Measuring things every day and taking away from those measurements, key steps, and drivers.”

Asked about the role its fast-growth strategy played in the company’s operational issues, Mattson says, “I think (Founder and former CEO) Kenny (Dichter) deserves a tremendous amount of credit for having basically taken this company from a startup in his garage…to the third-largest private aviation company (with over 12,000 members) in 10 short years.”

He continues, “Kenny and the company had very much of a growth mindset. It was all about growth. It was about uberization, democratization, and growth, and enabling access to this to the masses. The theory of the case was that we could continue to lose money because we’re growing so fast, people will keep financing us, and then at some point, we’ll figure out how this all makes money, but they didn’t really know how it was going to make money.

“What happened with Covid poured lighter fluid on some operational challenges that already existed. They did what most companies in a free-market environment do, which is chase the demand, say yes to the customers, and then figure out how to fulfill it, and the problems got worse. I like to say (this) because I believe it to be true that they were victims of their own success. They were successful in attracting customers, and they were victims of that success at the end of the day.

“What’s changing now is just an acknowledgment. The focus of the company is on operational performance and operational excellence. I have said, and I believe we can do this, that we are going to become the best-operated, best-run private aviation company around. That is going to be the underpinning of where we take this brand and this company going forward. That’s table stakes. That’s not like, ‘Hey, we might do that.’ We’re going to do that, and we’re going to put whatever resources and talent is required to do it.

“It’s going to take time. It’s not tomorrow. It’s continuous, it is a journey, but that’s what we’re going to do, and we’re going to leverage our partners at Delta’s capabilities and resources to help us execute that.”

Keep Climbing

The good news is not only that the company is owning up to those issues, but it also appears things may have already turned.

Following the appointment of former Delta operations boss Dave Holtz to lead Wheels Up operations last year and the opening of a centralized operations center in Atlanta earlier this year, Mattson says indicators are moving in the right direction.

“We’re making great progress. Cancelations (are) down more than 50% year over year. Flight completion (is) 98%, (a) 10-point increase year over year, as is on-time arrival,” Mattson says.

Not Delta Private Jets 2.0

Wheels Up is often criticized for its big spending on lifestyle marketing and celebrity partnerships, a Dichter trademark.

However, it’s precisely because of that marketing acumen – and Covid – Delta is back.

Covid changed consumer aviation customer behavior

– Wheels Up CEO George Mattson

From a historical perspective, Mattson notes, “Delta inherited the Delta Private Jets business through its acquisition of Comair (in 1998). It was a second-party managed-only business. It was not of scale and not central at that point to the Delta strategy.

“What changed is Wheels Up brought it to a whole other level of scale and relevance and Covid, and Delta’s migration was higher and higher, and closer and closer to the private aviation ecosystem with its premium commercial customers and products, and the changed consumer behavior. Covid changed consumer aviation customer behavior.”

Of selling Delta Private Jets, Mattson says, “The choice that was made was, we’re not going to be the ones that are going to build a private jet company that makes sense. We’re going to have 20% of Wheels Up. We’re going to cooperate with Wheels Up. It wasn’t highly defined at that point (beyond the commercial agreement that enables Wheels Up members to use deposits on Delta and gain Delta frequent flyer elite status).

“Delta didn’t put capital, and they took back stock in exchange for contributing a business. Psychologically, there’s a difference there.”

Mattson seemingly rebutted speculation that Delta’s rescue was a way to avoid a future conflict with its pilots’ union if Wheels Up folded, and then it wanted to get back in the private jet space at some point in the future.

After ordering over 100 new private jets, United Airlines gave up plans to launch Avolar in 2002 following protests from its pilots and flight attendants.

Mattson says, “I would tell you that figuring out the pilot strategy was never really a part of this conversation.”

On Marketing

Dichter fans credit his showmanship and penchant for high-profile sponsorships with helping expand private aviation’s TAM, the addressable market.

In its 2021 Investor Day presentation, Wheels Up dedicated an entire page to its celebrity ambassadors, listing how many fans each had on Instagram, Facebook, and Twitter.

In truth, it worked.

In the annual Private Jet Card Comparisons subscriber survey, Wheels Up consistently ranks neck and neck with entrenched market leader NetJets when asked about which private aviation flight programs they had considered.

We said let’s make it happen. You’re going to see more collaborations that we do like that. It’s just a no-brainer

– Kristen Lauria, Chief Customer and Marketing Officer

Delta’s commitment to making private aviation, specifically Wheels Up, a core part of its offering opens up a possibility that both Wheels Up and private aviation will get an even wider audience on even grander stages.

New Chief Customer and Marketing Officer Kristen Lauria, like Mattson, a veteran of IBM, doesn’t hide her enthusiasm for what may take place.

“We are meeting almost weekly with the marketing teams and with the SkyMiles teams,” she says.

The Delta loyalty program has around 100 million members.

By contrast, private aviation is thought to have only around 100,000 regular users in the U.S.

Lauria points to the joint marketing Wheels Up, and Delta launched before the investment deal was even closed.

She says, “We said let’s make it happen. You’re going to see more collaborations that we do like that. It’s just a no-brainer. We’re not spending months debating it. I think we said that on Thursday. We made it happen on Saturday, and we put the two brands side by side. Now, admittedly, that’s two logos side by side. Then there’s a lot more in terms of if they have a sponsorship at an event venue or a stadium, and they also have access to all the suites. A lot of those suites are used for corporate events. That’s a very logical play.”

Whether we will see Wheels Up as part of Delta’s Olympics sponsorships is yet to be determined. However, clearly, everything is on the table.

The Sales Pipeline

As previously covered, Delta believes that it can sell private flights via its corporate sales team.

That includes both in the Wheels Up guaranteed program and then outside the program via dynamic pricing from broker Air Partner, another Dichter acquisition.

The initiative was announced back in May during the Wheels Q1 earnings call.

So, how’s it working?

Mattson says, “Without going into specific companies or success stories… I’ve already been part of meetings with key decision makers at various corporate customers of Delta – dozens of meetings where there is clearly a positive response and an acknowledgment of an opportunity to work together being conveyed back. These are joint meetings.”

It’s a mix of companies that already use private aviation as well as those that haven’t, and while Mattson says he doesn’t have a specific breakdown, it’s something that should be viewed as good for the industry – expanding the TAM.

It’s also an important part of the Wheels Up strategy.

Executives say the company needs a better split of corporate versus leisure demand, increasing fleet utilization on Mondays, Tuesdays, and Wednesdays. The split is currently 90/10 leisure, executives say.

Closing the Sale

The point that Wheels Up critics ignore is despite its operational issues, people kept buying.

In part, that was because Wheels Up kept selling while competitors like NetJets, Flexjet, Sentient, Jet Linx, and others took a break, trying to figure out how to deal with the surge in demand and Covid operating constraints.

Wheels Up also goosed the pipeline by giving existing members and prospects the chance to lock in rates and terms for up to 30 months before new higher rates and more restrictive terms were introduced.

Some competitors used Force Majeure or clauses in their contracts to implement new terms on short notice.

The result was they were able to recalibrate revenues to costs, and Wheels Up losses increased, bringing it to the precipice.

Regional Focus

That ended in May when Wheels Up announced it was scrapping a nationwide guaranteed program, moving the King Air fleet to East of the Mississippi, plus Texas, and keeping a limited western service area.

The reduced geographic still area covers 80% of the previous demand.

FlyExclusive responded by adding surcharges for flights in and out of Washington and Oregon, two states where Wheels Up is no longer offering the guaranteed program.

Its CEO, Jim Segrave, says the operator didn’t have a lot of clients there and didn’t want a surge in Wheels Up refugees from the region, which providers say is notoriously difficult to serve – profitability.

Where Wheels Up continues to offer its guaranteed program – both availability and capped hourly rates – it is often among the cheapest, which critics say is why it loses money.

The strategy is that by focusing on markets where there is more density, there will be shorter empty-leg repositioning flights and quicker recovery flights (something that is part of most guaranteed programs), and the flying will be profitable.

The Pitch

However, that’s just part of the pitch.

Mattson says, “What we’re positioning and pitching really is flexibility. When you think about how we fit into the ecosystem of private aviation now, what we’re offering and we’ve always offered… we’re going to increasingly emphasize is a flexible solution to meet your specific needs and our ability to customize that solution to your needs.”

He continues, “Wheels Up 1.0 was a fairly rigid product, member-based guaranteed availability, guaranteed price deposit down type product.

“What we’re offering now is flexibility, whether you’re a primarily Delta flyer who will occasionally use Wheels Up or primarily Wheels Up flyers and occasionally use Delta. Whether your travel tends to be international versus domestic. We’re going to have something for everybody.

“I think that flexibility, when you compare it to a jet card or a fractional share, is something unique. Now that we’ve extended that across the chasm that existed between private and commercial aviation. It gets even more interesting to people.”

Dynamic Pricing

The idea is when you need to fly outside of the Primary Service Area where guarantees apply; Air Partner can source solutions as a broker via dynamic pricing.

Dynamic pricing is good for sellers.

In theory, it means every flight is priced to make a profit versus the guaranteed programs where sellers can lose their shirts on just a few highly unprofitable flights.

There’s just one problem. Private jet users want the guaranteed pricing by a 50% to 5.5% margin, although the remainder aren’t sure.

While Delta’s sales force and marketing platform will undoubtedly boost the pipeline, the question remains: Will the bean counters and folks who have to manage the budget and bookings want to have those trips priced out trip-by-trip?

There is no shortage of guaranteed options where Wheels Up has pulled back its guaranteed program.

It will be interesting to see how it works out.

Fund deposits plummeted in Q2 as members feared bankruptcy and closure.

More recently, Wheels Up is again pushing hard on its guaranteed program.

Just last week, it was out with multiple offers for rate locks, flight credits, and Diamond status on Delta.

Future Fleet

With the Airshare deal done, Wheels Up has exited the aircraft management business, essentially the business it bought from Delta in the first place.

Put another way, Delta has traded its aircraft management business for a floating fleet operation of owned and leased aircraft.

It’s an important differentiation.

Gone are aircraft owners and any restrictions they may have placed on how and when their aircraft could be used for charter flights.

But what’s next?

Smith and Mattson each say it’s likely they will need fewer King Air turboprops.

Mattson says corporate flyers like bigger jets.

As part of the May 2023 program revamp, it ended its large jet guaranteed program.

What will happen with its fleet of nearly 50 Citation Xs?

They are the core of its long-flight discounts that make it a price leader coast-to-coast.

When asked about fleet plans, Mattson wasn’t specific.

He says, “We don’t think about this statically; we think about it dynamically. We have some adjustments.”

While there will be a reduction, he says, “We don’t have a number that we’re managing to precisely yet because there’s a lot of moving pieces.”

Some of it will be based on what customers say they want, he says.

What you don’t have, you don’t need it now?

Will Wheels Up one day be back at NBAA ordering new private jets?

Mattson chuckled when I asked him.

He is focused on getting Wheels Up to profitability next year, a stated goal before his arrival.

On Nov. 9, Wheels Up will report its Q3 results, and we will be able to see what, if any, progress the company has made.

It’s a beautiful day. Don’t let it get away.

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