The arrow is pointing down for Wheels Up.
The on-demand Part 135 provider, which reserves prepurchased time on airplanes from charter operators through a membership model, on Wednesday announced that it received emergency funding from Delta Air Lines, which owns one-fifth of the company. It postponed its earnings announcement, which was scheduled for Wednesday morning.
Multiple media reports claim the firm said there was “substantial doubt” about its ability to continue operations, even with the investment. Wheels Up stock (NYSE: UP) was in freefall Wednesday morning, tumbling nearly 45 percent.
“Wheels Up Experience Inc. is actively involved in discussions around strategic business partnerships for the company and [Wednesday] announced that Delta Air Lines has provided a short-term capital infusion to the company,” the company told investors in a statement.
Wheels Up also said it has entered into a nonbinding letter of intent to sell its private jet management business to private aviation company Airshare. The move sheds non-core company assets and was hinted at in May, when the company underwent a leadership shake-up amid weak financials and whispers of bankruptcy.
Airshare stands to double or even triple its owned and managed fleet if the deal goes through. Wheels Up would be left with some 150 King Airs, Citation Excels, Citation Xs, and other aircraft out of its current fleet of around 1,500, which includes partner aircraft.
The deal is expected to close in the third quarter, subject to customary approvals.
“Airshare has our same dedication to the customer and focus on extraordinary service, and we believe this will be a great destination for our managed fleet and team,” said Dave Holtz, chairman of operations at Wheels Up. “As we looked for a strong partner, Airshare’s commitment to aircraft management and overall customer experience stood out.”
What It Means
Rumors of Wheels Up’s cash flow woes first emerged Tuesday, when Bloomberg News reported the firm would seek emergency funding to keep it afloat. The hope is that shedding the private aircraft management business will help it bounce back after a disappointing few quarters.
Wheels Up became the largest Part 135 operator in the U.S. last year with more than 1,500 owned, leased, managed, and partner aircraft in service. But since going public, the company has lost money each quarter.
Those losses, combined with recent cost cutting, layoffs, and murmurs of bankruptcy, precipitated Wheels Up founder and chief executive Kenny Dichter’s May resignation. The company has yet to name his successor, with former chief financial officer Todd Smith serving as interim CEO. Dichter’s departure also marked a shift in focus toward the company’s core charter business.
In the first quarter of 2023, Wheels Up reported year-over-year revenue growth of $26 million, suggesting some rebound potential. But compared to Q1 2022, it posted a 1 percent decline in active members and a 13 percent dip in live flight legs as its net loss climbed $12 million.
It’s unclear how much the aircraft management division contributed to that figure. But Airshare sees potential in the business.
“Aircraft management has become a core source of revenue for Airshare,” said John Owen, president and CEO of Airshare. “Adding aircraft capacity and valuable owner relationships to our rapidly expanding managed fleet positions us very well for the future.”
Airshare, which also offers days-based fractional ownership, jet cards, charter services, and third-party maintenance, already provides management for the three aircraft types (Beechcraft King Air, and the Cessna Citation Excel series and Citation X) that currently comprise the bulk of Wheels Up’s fleet. Those services also extend to light and large-cabin jets, such as the Embraer Phenom 300 or the Bombardier Global 5000.
Integrating Wheels Up’s base of managed aircraft should add flexibility for Airshare customers. Doug Gollan, editor-in-chief of Private Jet Card Comparisons, reported, “Jet card and fractional customers of the Overland Park, Kansas-based company will now have broader charter options when their program aircraft type doesn’t fit their mission.”
In addition, aircraft owners currently in Wheels Up’s management program will now have increased opportunities to earn money when they aren’t flying by chartering their aircraft to Airshare’s base of customers.
“A core part of our business is aircraft management, and this is certainly going to strengthen that aspect of our business,” an Airshare spokesperson told FLYING. “But we offer a holistic suite of solutions that encompass aircraft management, fractional programs, and charter, and through this potential transaction, every customer we have across all those solutions will benefit.”
Airshare appears to be gathering momentum, having recently placed an order to double its Bombardier Challenger 3500 fleet, expanded into Florida, and extended its brand deal with Kansas City Chiefs superstar quarterback Patrick Mahomes II.
According to research by The Business Journals, the company records around $142 million in annual revenue.