Q&A with Delta CEO Ed Bastian, Wheels Up CEO George Mattson

In August of 2023, the future of Wheels Up was very much in doubt. While Delta Air Lines CEO Ed Bastian, whose company had a 20% stake in the private jet airline, had been publicly supportive back in May following rumors of bankruptcy, over 10,000 members who had prepaid over $1 billion for future flights were wondering whether they would lose their money, ending up as unsecured creditors. From meeting Wheels Up Founder and former CEO in 2019 Kenny Dichter to leading last summer’s $500 million rescue package, and what’s next, Bastian and Wheels Up CEO George Mattson, who have known each other since the late 1990s, share the story behind the story. They also talk about what’s next and the tangible results of the partnership.

Private Jet Card Comparisons: How did the deal to sell Delta Private Jets to Wheels Up come about?

Ed Bastian: As you know, we had DPJ for many years, and it came out of Comair, which did a big deal with Bombardier. They were the original CRJ operator in the airline days. They brought the CRJ100s and then the 200s. They had a couple of private jets. They were using them to transit customers, and they weren’t quite sure what they were doing with them, but they got thrown into a deal. That eventually just grew into a business. Other than those two airplanes, we never bought a private jet. They were always other people’s money (managed aircraft), and we would take them and (charter them out when the owner wasn’t using them). People love the fact that you have the Delta brand alongside their own personal plane. You got the Delta pilot, not a mainline pilot, but a DPJ pilot and maintenance crew watching after it. It grew into a pretty nice business, but it got to the point it was a healthy business generating a bunch of cash. We had a couple hundred million dollars of cash on the balance sheet, but for me, we weren’t really invested in it. It was always a bit uncomfortable. In the aviation business, you’re either all in or you’re not. To me, we were one foot in, one foot out. I wasn’t certain it was adding, at the end of the day, the value to our brand relative to the risk and the potential management distraction it could cause. (Wheels Up Founder and former CEO) Kenny (Dichter) and I got together in 2019 and spent the year together. He was looking to grow.

PJCC: Did you know Kenny before 2019?

Bastian: I did not.

PJCC: Did he approach you to buy DPJ?

Bastian: He had the idea that he would work together with one of the big commercial airlines and try to figure out if there is something to do together. He was particularly interested because of DPJ. We spent quite a bit of time talking about it and going back and forth. We eventually got the deal agreed to by the end of 2019, which we gave them the DPJ business. There weren’t really any assets or cash that we put over there. They took the employees and the business model. We got paid, plus we wound up getting a 28% interest in the new company. We had the intention to actually do what (current Wheels Up CEO) George (Mattson) is doing today, except along the way, Covid got in the way. Early in 2020, right after we closed the deal, we shook hands and said good luck.

PJCC: It was a tough time for the airlines!

Bastian: At that point, (Delta) was just trying to stay alive, and our business went through the floor. Private jets eventually started to accelerate because people (didn’t want to be in) any kind of mass group of people during that time. We watched how they were doing. All along, I always saw this opportunity to put another stack on the top of our premium customer base. That this would be the ultimate experience that customers would want to have. Working side by side with Delta, bringing a lot of the technology, know-how, expertise, sales capability, and contacts, I thought it was a perfect idea but not easy. Totally different business. Certainly, Covid taught us it was even more difficult than it turned out.

PJCC: Obviously, your hands were full with the pandemic and everything that was happening in the airline industry and the travel industry. At what point did Wheels Up start to come back onto your radar?

Bastian: We had (former Delta SVP New York) Gail Grimmett in New York, who was staying close to the Wheels Up. It was her only assignment. It wasn’t that we were detached from it; we just weren’t focused on it. Kenny raised a bunch of money, used it to buy up a number of operators, and was in the midst of putting those operating certificates together. (In late 2021) I asked Dave Holtz (who was about to retire from a 42-year career where his work running Delta’s operations center is credited with helping propel it to the top tier of global airlines) to go over and help him and provide senior counsel, and since we knew how to do that, we’ve bought airlines in the past, we’ve merged with Delta-Northwest or a few others over time. He wound up serving as Kenny’s advisor, overseeing a little bit of the integration of the certificates, and eventually, as time went on, started running it.

PJCC: When you go to the beginning of 2023, Wheels Up was beating the revenue expectations, but the expenses were going up, the cost of buying charter flights off-fleet, the challenges of integrating the certificates, and the losses were accelerating faster than the revenues. When did you start to get to the point where you thought there might be a financial issue?

Bastian: We were watching the performance, and we certainly see the reliability start to degrade materially. We understood that we had customers over there with deposits on Wheels Up, and so I felt the responsibility to make sure we were delivering to them what they needed to deliver, or else we have people moving their money from Wheels Up over to Delta, which wasn’t the idea. They could do that, but (the intention was to fly) with Wheels Up. It became clear to me, probably I’d say the spring of ’23, this was turning into a big issue.

PJCC: What were your first thoughts about it? As you started to see the losses mount and the deferred revenue increase at Wheels Up, you had just gotten through the Covid crisis?

Bastian: You work in the airline industry; you’re not shy about challenges. It kick-starts you into the next level, and we’d like to say, in our business, there are some people that run from the fires. We run towards the fire. This was certainly a fire, and we worked with the board. We worked with Kenny. We had a couple of members of our team on the board of Wheels Up at the time and got involved in the fundraising activity to see how they were doing, and it became clear to me maybe May, June timeframe, that we weren’t going to find a source of funding away from Delta without Delta’s participation at some level. That’s when I got involved, when I realized that in order to save the franchise, Delta was going to need to be a part of the solution and need to provide some capital to the business.

PJCC: Was there a concern because they were selling the (jet card) deposits that you could transfer up to Delta, that if they did cease operations or go bankrupt, that that would be a liability for Delta?

Bastian: Sure, absolutely. It was part of it. It wasn’t the main reason, but it was part of the consideration. Kenny and I spent a lot of time together in that June-July period looking for whether it’s private equity or family offices or some people that were attuned to it. It was an interesting experience for me personally because Delta was doing great at that time, post-Covid. I never had a problem with Delta raising capital or raising money. Being told no many times over was good for me to hear. Quite a few people told me that, ‘We’ll give you as much money as you want, as long as you promise not to give it to Wheels Up.’ It was, ‘Okay, this is going to be a challenge, but we like challenges.’ Eventually, we put together a coalition with a couple of our partners today, Certares and Knighthead, folks that I’ve known for a very, very long time. I’ve known Greg O’Hara, who founded (Certares) for a very long time He and I have always been trying to do a deal for years. We’ve always been around together and known each other for years, but never really figured out the place where we can invest together. We called him, and we had about a week left before they were literally closing the doors.

PJCC: Was this the beginning of August?

Bastian: It was early August. I called Greg and said, ‘This is the time.’ I give him credit. He was interested. Because it wouldn’t have made sense for Delta to come in and own it. We wanted to be owners, but not the owner of it. I think that would’ve defeated the purpose. We wanted to have external capital as well. We were happy to get Greg and Tom Wagner from Knighthead, the Cox Family, Cox Enterprises came in also and collectively put together a $400-million bailout package where we were able to stem the bleeding, but more importantly then, starting to bring resources to bear, which as you’ve seen now, has helped change the trajectory. It’s going to take some time. We knew this was going to be several years in the making, but I still believe in the original vision back five years ago that this can be unique. It’s something that’s never been done before. It’s not easy, but we don’t shy from a challenge.

PJCC: Going back a couple of months, it was the beginning of May, Berkshire Hathaway Chairman Warren Buffett, at his shareholder’s meeting, after talking about NetJets, said Wheels Up customers might be disappointed, inferring they could lose their deposits if Wheels Up closed. What were your thoughts when you heard that?

Bastian: I didn’t appreciate it, of course, because I know Warren very well. He’s selling NetJets.

PJCC: Did you call him at all?

Bastian: No. I didn’t want to do that to him.

PJCC: Have you talked to him since then?

Bastian: We’ve talked, not about Wheels Up because I have Delta’s interests. He was, before Covid, our largest investor. I know Warren very well. I didn’t want to do anything, from a relationship standpoint, that would cause problems for him.

PJCC: On May 17^th, you were at The Wings Club, and CNBC’s Phil LeBeau was doing a Q&A with you. Did you know the last question was going to be about Wheels Up?

Bastian: No.

PJCC: He asked you, ‘Did you regret Wheels Up?’ I think a lot of CEOs would have tried to defer, but you leaned into it.

Bastian: Yes. Well, we needed to find an answer. Again, I believe strategically it’s going to be a great fit over time. The path hasn’t been very clear for some period of time. Now that we’ve made this great progress on the reliability and the confidence that the customers have back in the product, the opportunity with the new acquisition of fleet, and the changes that George is leading, and the team that George has assembled around himself, I’m very, very optimistic that that vision is going to come to pass and that $400-million bailout is going to turn into one of the great financial investments Delta has ever made.

PJCC: Did you know, when you’re answering the question, that you’re going to find a way to figure things out?

Bastian: In May?

PJCC: Yes.

Bastian: [laughs] No. If you show panic or some level of interest or concern over that, it’s going to be hard. I believed we were going to find an answer clearly. It just took a little longer than I thought.

PJCC: Going back to 2000, United Airlines had a plan for a private jet division called Avolar. They put in some orders. Then, after 9/11, they killed it after the unions were upset. Seeing that you believe Wheels Up is part of the premium strategy for Delta, was there any thought that if you let it go this time, it would be very hard to get back into the private aviation sector in three or five years?

Bastian: Yes…Kenny developed a heck of a brand. Still has to this day, (Wheels Up’s) market cap is $1.5 billion or more, not necessarily supported by the fundamentals at the moment, financial fundamentals, but supported by the interest in the brand and the power of private aviation. That’s what we want to tap into.

PJCC: In the Q3 earnings, Wheels Up said the largest portion of block sales in September was from Delta’s corporate customers. It sounds like you are getting traction.

Bastian: The overarching opportunity for us was the strength of (Delta’s) affluent customers, our corporate businesses, and our premium customer base. It’s driving all of the growth of Delta premium as a whole. You go back over the last decade, and you can look at our mainline, our base businesses. It’s doing fine. It’s steady, but all the growth has been premium. This feeds into that. Having the large presence in the corporate business community, being the most trusted source for business travel – we won (Business Travel News’ top airline rating) 13 years in a row. In the next few days, we look to hear number 14; fingers crossed. We knew there was this opportunity because every corporation that I know, most corporations I know, whether the large companies or even midsize or smaller companies have some component of private aviation within their company for their executive team. I can’t help but think there’s a better way to manage that and help them manage that since we already manage all their travel anyway. It’s going to take time because you must deliver the reliability that Delta delivers, which is not historically what Wheels Up had been capable of doing. There is an avenue to almost make it plug and play. That you’d have the same account manager, you’d have the same overall relationship, you’d have a different product, but you would have at least as good an experience, if not better. And it needs to be better since it’s more expensive to fly private, with Wheels Up as the vehicle to do that.

PJCC:  There were quite a few doubters who said at those companies it is a different person who is responsible for regular corporate travel versus private aviation?

Bastian: We’re seeing that starting to take hold. It wasn’t overnight. The people who make those decisions typically tend to be the buying managers. They tend to be somewhat risk-averse. The last thing that they want to do is get in trouble with their CEO. That takes time to build that track record. Over time, slowly, we are doing that, and we are building that. With not just George’s leadership but my own personal interaction with CEOs across the corporate space, people are curious about what we’re doing.

PJCC: You’re out selling Wheels Up to corporate accounts?

George Mattson: He’s my chief sales officer.

Bastian: I’m selling a lot. I’ve got my name on this for the last five years, so I’ve never really taken that name off. It’s not simply just the efficiency and the ability to bring this together. You think that (private jets) are probably some of the most underutilized assets many of those companies have. They tend to overbuy and overbuild. In a world where sustainability is the biggest challenge, private aviation has, looking forward, thinking about how we justify or how companies justify, or individuals justify, how much the footprint they’re creating and leaving for their own personal private needs, there needs to be a better solution here. We’re part of that answer.

Mattson: The corporate use case is clear, and we built really strong ties. Delta has a thousand salespeople that we are basically fully plugged into on a daily basis. My first call this morning was at eight o’clock with the Delta corporate sales leadership and team. That’s happening every day. It’s an integrated conversation happening about the renewal of corporate sales agreements and basically having Wheels Up be a component or a sleeve of that expanded agreement. Beyond corporate, Delta has 20 million active SkyMiles customers. A small percentage of those are likely private aviation flyers, but a small percentage of a big number is a big number, and there are a lot of high net-worth premium traveling individuals who are also part of the frame here.

PJCC: Are there other areas of synergy?

Bastian: To that point, one of the Delta board members on George’s board of Wheels Up is Alain Bellemare, who’s the president of our international business. It’s tied right at that level strategically.

PJCC: And are there other areas where there is synergy?

Mattson: Then on the resource side, Ed and I have a standing dialogue about where we are on resources, what we need. Obviously, Delta has a huge bench of talented professionals, many of whom I’ve had the benefit of having come over either permanently or on a seconded basis. Just this week, one of the senior leaders in the customer experience space at Delta came here. We have to tie the product, the metal, into a great experience. We’re going down that journey as well.

PJCC: After Kenny stepped aside, there was an outside search firm hired to find a successor. What’s the story behind George being named Wheels Up CEO?

Bastian: We did have the search going and we did have a couple of candidates that were very interested in taking the role. I personally wasn’t a fan of some of the people because they just didn’t have the expertise in this specific business. I wasn’t sure they were the right answer, and we had already largely secured the financing. We didn’t close the financing, but…

Mattson: Going back a little bit further, in 2019, when we first looked at Wheels Up combining with or merging DPJ into Wheels Up, I was the chair of the finance committee (of Delta’s board). As was often the case, when we were looking to do something transactionally, Ed would call, and we’d spend a little time on it, and it would get to the finance committee, and the board would look at it and so forth. In September of 2019, Ed called and said, ‘Hey, we’re looking at DPJ, and we’ll be merging with this company called Wheels Up. Could you come up to Atlanta? Let’s spend some time on it.’ That was my first exposure to it. I already had exposure to the Part 135 aviation space through my investment some years prior to that in Tropic Ocean Airways, since my time in the space. I’ve always loved aviation. That’s where my journey with Wheels Up started. As Ed said, we closed the Wheels Up deal in January of ’20, a month before Covid. Then, the finance committee and Ed and I, started working on raising capital for Delta and so forth. Then we got to the other side of Covid. When we were in the boardroom seeing the Wheels Up situation evolve through the summer of last year, and I was seeing how Ed and the management team were thinking about how integral this was going to be to an extension of their premium strategy going forward, which it was in the beginning also, but I would say at a different level. What had happened at Delta in those intervening few years is Delta had become even more committed to even further along in its own premium journey. What Wheels Up does, and private aviation had only become more relevant to Delta through Covid and on the other side of Covid. I had just actually taken a role as president of an asset management firm nine months earlier. I’m sitting there, I’m looking at this, and I’m beginning to understand how this is going to integrate into a Delta strategy, and how we’re going to do something disruptive that’s never been done before in aviation, period. I just started saying, ‘Wow, this could be really interesting.’ It could be really hard, it’s going to have a lot of risk, but I believe we can do this, and I particularly believe we can do this if it’s alongside, shoulder-to-shoulder, a partner like Delta. I also had seen, through the course of 11 years on the board of Delta, what partner means. Partner’s a very general term that means a lot of things for people, but as you’ve seen and what it means at Delta, whether it’s us or other JV partners of Delta, it means, basically, we do this together, we do what needs to be done no matter what, and that’s the mindset. That got me really interested, and Ed and I started talking in August, and pretty quickly, I think we announced (my appointment) in the middle of September.

PJCC: When you look at the Delta app as a consumer, and you’re going on a flight where you have to connect through Atlanta or Detroit, or you’re looking for four seats in first class to Aspen, and you have skis, will there be a time where, on the Delta app, it will also say, ‘Click here to see a private jet?’

Bastian: Absolutely. That is absolutely where we’re looking to go because making that as visible and accessible is one of the opportunities here. Again, historically, those types of questions were always on the original roadmap. We just haven’t been able to get there yet. We’re not going to put the Wheels Up brand on the Delta app until we’re confident in the delivery of the same level of expertise and excellence of service. George is getting there with the fleet and everything he’s doing. That’s on the roadmap. I don’t know a current timeline, but over the next couple of years, you’ll definitely see that. The capability is easy. It’s about making certain that the brands are truly, truly linked together. It needs to clearly be a premium experience above Delta’s most premium commercial experience. We’re on that journey, but we’re not maybe 100% there yet. With the new fleet and the new investments George is making, I’m confident we’re going to get there soon.

PJCC: You mention Certares, which owns a large group of luxury travel agencies. Do you plan to leverage that relationship?

Mattson: It’s a core part of our strategy. We’re spending a lot of time with travel agencies now, including those that are owned by Certares and others, building out that use case for private aviation. It goes back to the whole core tenet of the strategy we have. To your question about, is this going to end up on the Delta app? The whole idea, which is completely contrary, as you know, to the way private aviation is accessed by customers today, is customer-centric aviation solutions that allow the customer to choose their mode of travel trip by trip. Whether it’s Delta, whether it’s private, if it’s private, the aircraft type it is, whether it’s a hybrid of those, and whether you’re flying 90% commercial and 10% private or the opposite, we don’t care. Our whole idea that we’re trying to put forward is this idea of getting customers tools to make choices. We think that’s going to be successful. It’s the same thing with travel agencies. The travel advisor can talk to their customer and say, ‘Here’s the three ways you can get to your dream vacation. You can do it commercial; you can do private. You can do an optimized hybrid.; That’s exactly what we’re trying to bring to the fore. If you think about how different that is than somebody buying a fraction of an airplane, somebody owning a serial number, specific plane that has a specific mission profile, it’s the opposite of that. That’s resonating with travel agents.

Bastian: It’s also about democratizing and bringing private aviation to a greater mass of people. Most people are reluctant to embrace private aviation. They’re not quite sure how much they’re going to need it. They don’t know what the financial requirements are. There are a lot of obstacles to getting there, but if you can do it, as George is building, an on-demand model coupled with the Delta backing, that if you put money down, you can use it on us, you can use it on them, you don’t have to make a very large commitment. You’re democratizing and bringing more people, which turns into an incredible experience where people can use it. They may only fly two, three, or four times a year, but they take their family. The business guy who’s traveling the year and wants to really treat his kids, his wife, and his dog to do something special, those special opportunities. We can’t do it commercially the same way that George can, and that’s really where we’re going with this.

PJCC: Is there anything we didn’t talk about that you want to mention?

Mattson: We’re at the one-year mark. We did our fourth quarterly call this morning. We’ve made a lot of progress. We started from a very challenging position as Ed described. As I think about the chapters of the journey we’re on and the book we’re writing, the first chapter of this first year was about stabilizing the business. It was about clarifying and defining the strategy and the customer set. It was about getting the financials heading in the direction we wanted to. After seven quarters of declining, revenues have stabilized. We’ve grown margins by 15 points in a year. Really, that opens up chapter two. Chapter two is a chapter of fleet renewal, long-term investment, and continued financial improvement, and continued customer experience improvement as we work to align ourselves more closely with where we should sit in the premium stack of Delta, which is where we’re going.