How Delta Air Lines’ Ed Bastian Saved Private Jet Company Wheels Up

“Everyone is with you when things are great.” – Tom Brady on Delta CEO Ed Bastian’s Gaining Altitude podcast

Can Wheels Up execute a 180-degree turnaround after more than $1.5 billion in net losses since 2020? Does it have the right game plan following a half-dozen acquisitions, a series of divestitures and now another acquisition? What happened in the weeks and months before Delta Air Lines led a $500 million investment in August 2023? Back then, reports of bankruptcy were swirling as members worried about the fate of the billion dollars they prepaid for future flights and 2,500 employees wondered whether they would see their next paycheck. Has the ballyhooed relationship with the big airline yielded dividends? From the sale of Delta Private Jets to Wheels Up in 2019, through the premature reports of its demise, and what’s next, for the first time, four of the central actors go on the record to tell the story.

In the Summer of 2023 Wheels Up, the nation’s third-largest charter/fractional operator, was on the … [+] precipice of failing. At stake were around 2,500 jobs and more than $1 billion in payments for future flights from its jet card members. If it shuttered, the preowned jet market would have been swamped. Pictured is Delta Air Lines CEO Ed Bastian who led the rescue effort. (AP Photo/Paul Sancya)

Copyright 2017 The Associated Press. All rights reserved.

Delta CEO Ed Bastian relates how, after Warren Buffett dissed the company, he personally pulled together financing and why he is now putting his reputation on the line by pitching Wheels Up to CEOs at the airline’s top corporate accounts. Former Goldman Sachs banker and Delta Board Member George Mattson, who has known Bastian since he was the VP/Controller at the airline in the late 1990s, discusses his interesting journey to becoming Wheels Up’s CEO and why he wanted the seemingly impossible job. Then CFO Todd Smith, who served as Interim CEO in those difficult months leading up to Delta’s lifeline, relays what he quickly discovered after joining the company in June 2022 and the fight for survival. About to retire in late 2021, longtime Delta operations wizard Dave Holtz shares how a call from Bastian laid the groundwork for the nascent rebound.

Skygods
“No airline has ever had a private experience at scale, and this is what we’re building at Wheels Up.” – Delta CEO Ed Bastian speaking to Wheels Up members during a private event at the Masters in April 2024

“Totally different business” is how Bastian, one of today’s most lauded airline bosses, describes public and private aviation. The big scheduled airlines are massive entities. They have tens of thousands of employees and use sophisticated yield management systems to squeeze every nickel from customers. They set schedules, book hotel rooms for crews, and plan menus and maintenance months in advance. Every touchpoint is a digital opportunity to sell something to passengers, from affinity credit cards to trip insurance and priority boarding. On the other hand, scheduling a single private flight can mean more than 60 emails, phone calls and text messages. What’s more, private air flight providers selling guaranteed jet cards and fractional ownership programs allow their customers to create their own routes, schedules and meal options just hours before departure, all at preset prices they guarantee for a year or longer, certainly a risky proposition.

“I thought it was a perfect idea but not easy,” Bastian says. In fact, very little is easy in aviation. “You work in the airline industry; you’re not shy about challenges. It kick-starts you into the next level, and we like to say that some people run from the fires in our business. We run towards the fire. This was certainly a fire,” the Delta CEO tells me a few minutes before he and Mattson conducted a town hall for Wheels Up employees last week in the Atlanta suburb of Chamblee.

Yet, if you follow the airline industry long enough – both the big scheduled airlines like Delta (which operates under Part 121 regulations from the Federal Aviation Administration) and the private jet versions like Wheels Up or NetJets (that fly under Part 135 and 91K), there is the realization even the ones that are blazing infernos can be saved and rebuilt. The cures typically involve a recipe of cash, debt, divestitures, mergers, new strategies, bankruptcy and, most of all, new managers with a big vision and the discipline to execute.

Former American Airlines CEO Robert Crandall took the airline from a laggard to the most U.S. … [+] powerful post-deregulation airline with cutting edge technology, the first scaled loyalty program, and an innovative wage structure. (Photo by Mark Perlstein/Getty Images)

Getty Images

Robert L. Crandall brought American Airlines from an also-ran in the 1970s to the most powerful post-deregulation U.S. airline in less than a decade. He invented yield management, creating a litany of fares to maximize revenue from each seat. He rolled out the first scaled frequent flyer program. His two-tiered wage structure enabled American to compete on a cost basis against non-unionized airlines and start-ups. Colin Marshall and John King turned British Airways from historical losses to profits in short order during the 1980s with innovative products, sophisticated brand management, and empowering front-line employees to put customers first. Gordon Bethune and Doug Parker took Continental Airlines and America West from the scrap heap of bankruptcy to what today you know as United Airlines and American Airlines.

Private jet airlines have shared similar journeys. After NetJets lost $711 million in 2008, Warren Buffett disclosed in his 2010 letter to shareholders that the world’s largest private jet airline had been a money pit. “Even though NetJets was consistently a runaway winner with customers, our financial results, since its acquisition in 1998, were a failure,” he wrote. That changed. While Berkshire Hathaway doesn’t break out results for its private airline, at its 2023 annual meeting, the late Charlie Munger claimed NetJets was as valuable as any of the big boys. That would infer around $9 billion, based on the market cap of American, the least valuable at that point. After selling Flight Options in 2002, Kenn Ricci bought back the company he founded in 2007 just as it was skidding off the runway. A pilot in his own right, he took the controls and steered it onto the taxiway. From there, he used acquisitions and product differentiation to reposition and rebrand his entity, taking flight as Flexjet, Inc., today’s most potent competitor to NetJets.

So, is Wheels Up ready to take flight as the industry’s next turnaround story?

Prologue
“If a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down.” – Warren Buffett on investing in airlines

To appreciate the whole story, let’s go back to the beginning.

The 2013 Wheels Up launch marked Kenny Dichter’s return to private aviation. A serial entrepreneur who started his first business in college, Dichter founded Marquis Jet Partners in 2001. It sold 25-hour prepaid jet cards on the fleet of NetJets, which offered fractional ownership. That meant NetJets’ customers had to buy a slice of a jet. It had been an enormous innovation 15 years earlier.

To make it make sense, a buyer needed to fly at least 50 hours of flights per year. What’s more, contracts ran for five years. It was less of a commitment than owning an entire jet and removing many hassles. It was still a big nut. Early customers were corporations that used the service to supplement their fleets of jets or didn’t fly the hundreds of hours per year when owning a private jet made sense.

Dichter saw a different, bigger, and untapped market. He noticed an industry where the standard ads featured suit and tie-clad executives in the back of an executive jet, laptops open, stacks of files, working. Marquis Jet showed prospects how private aviation could convert wealth into quality of life. Its marketing featured images of a dad at his kid’s soccer game and families flying to the ski house. It worked, bringing a steady stream of newcomers into private aviation. Flexjet’s Ricci, whose Sentient Jet is credited with inventing the category in 1998, says, “The jet card has created a market that previously did not exist and has exposed many new entrants and first-time buyers to our industry.”

Jake Steinfeld with winner Jennifer Tuttle and Kenny Dichter, CEO and founder of Marquis Jet. … [+] (Photo by Gary Gershoff/WireImage for Amacom) *** Local Caption ***

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In 2010, Berkshire Hathaway bought Marquis Jet and folded it into NetJets amid the Great Recession. According to Corporate Jet Investor, Marquis Jet represented 65 aircraft in the NetJets fleet at its sale, which would have meant over 2,000 jet cards if fully sold. By making a guaranteed rate product available to a larger audience – democratization, Marquis Jet was selling hundreds of millions of dollars in private flights to a market of HNWs who didn’t fly enough to buy a fractional share or didn’t want the long-term commitment. Instead of the friction-filled process of chartering on an ad hoc basis, going back and forth with brokers, receiving faxes with quotes, faxing back contracts and credit card signatures, or wiring funds, they could book flights with one phone call. They knew how much it would cost on a per-hour basis.

Members of these guaranteed programs only paid for their time in the jet, not the repositioning flights factored into on-demand charter pricing. And since members had paid in advance, they didn’t have to worry about transferring funds on weekends or after hours. Acting like a debit card, their balance was reduced with each flight they took. It made flying privately easy. With flight hours and funds on tap, jet cards created spur-of-the-moment trips. Before Covid, many jet cards let you book or cancel flights at those contracted rates eight or 10 hours before departure. If the weekend forecast was rain for your hometown, you could book a flight to somewhere sunny. If there was going to be bad weather in the place you were headed, you could cancel without penalty.

After launching Marquis Jet in 2001, Kenny Dichter returned to private aviation in 2013 with Wheels … [+] Up promising to again bring new customers into the market by making private flying more accessible.

Wheels Up

Dichter promised his return with Wheels Up would be even bigger. He would further democratize private aviation, again attracting newcomers. He would have 10,000 members and a billion dollars in revenues within 10 years. “More Netflix than NetJets,” Dichter liked to say. He promoted his King Air turboprops as private aviation’s version of an SUV. With eight seats and room for as many golf bags, it was perfect for outings to the links or getting to the beach house. Five and six-hour drives in traffic became 60-minute flights.

Like Marquis Jet, even though it owned airplanes this time, Wheels Up was simply a sales and marketing entity. Dichter outsourced operations to a top-tier charter operator, which managed its fleet. Gama Aviation Signature hired the pilots, maintained the aircraft, and handled the complicated logistics of running a private airline. Dichter set up a member services center to take booking requests. Instead of locating the team at his Times Square headquarters in New York City, it was in Columbus, Ohio. He attracted talent from Ohio State’s aviation program – and NetJets, which is based there.

Aug. 1, 2013 – Kenny Dichter announces his return to the space with another start-up, Wheels Up, ordering 105 King Air turboprops to democratize private flying, making it accessible to a broader market.
Sep. 3, 2015 – Midsize Citation Excel/XLS jets are added to the fleet as the company seeks to capture a larger share of wallet from members for flights beyond its King Air turboprops.
Sep. 28, 2015 – Wheels Up announces a $115 million raise, giving it a $500 million valuation.
Apr. 21, 2016 – Wheels Up launches 8760 offering members private meet-and-greet opportunities with top athletes and entertainers, as well as complimentary tickets and suite access to sporting events and concerts.
Sep. 8, 2016 – Wheels Up launches “Same Day Game Day” college football shuttles.
Oct. 8, 2017 – Wheels Up announces a $117.5 million raise, giving it a $700 million valuation. It begins adding Citation X jets with the range to fly members coast-to-coast.
Sept. 20, 2018 – Rival Vista Global buys XOJET, the third-largest U.S. charter operator, setting off a spree of operator, broker and technology M&A.
Feb. 20, 2019 – Wheels Up launches entry-level Connect memberships to expand the market via jet-sharing between members.
Apr. 4, 2019 – Wheels Up announces an urban mobility partnership with Textron Aviation.

Wheels Up ordered 105 King Air twin-engine turboprops. Founder Kenny Dichter used them to entice … [+] more HNWs to fly privately.

Wheels Up

Having raised hundreds of millions of dollars, in June 2019, Dichter bought TMC Jets, with a fleet of 26 Hawker 400XPs. For the first time, Dichter owned an actual airline instead of just selling flights on airplanes operated by a third party. Asked if there were more transactions in the pipeline, Dichter told Private Jet Card Comparisons, “It’s safe to say we’re in the deal-making mode,” adding, “Wheels Up wants to be a total provider of global private aviation solutions.” The race was on. He acquired four more charter operators with six operating certificates, a charter broker, and a technology company. He also launched an aircraft brokerage unit. In December 2019, with a $1.1 billion valuation from its most recent raise, Dichter made his most important deal. Delta agreed to sell its Delta Private Jets unit to Wheels Up for a 28% stake.

Jun. 3, 2019 – Wheels Up buys TMC Jets and for the first time, becomes the actual operator of its flights.
Aug. 8, 2019 – Wheels Up announces a $128 million raise, giving it a $1.1 billion valuation.
Sep. 3, 2019 – Wheels Up buys tech platform Avianis Systems. Dichter says, “Booking a private jet should be as easy as booking a car with Uber or booking a home with Airbnb.”
Dec. 16, 2019 – Delta Air Lines announces it will sell its Delta Private Jets charter and aircraft management unit to Wheels Up, taking a 28% stake in the company.
Mar. 2, 2020 – Wheels Up buys Gama Aviation Signature, the company managing and operating its initial fleet.
Sep. 30, 2020 – Wheels Up launches an aircraft management sales group leveraging Delta Private Jets and Gama Aviation Signature.

Fast forward to 2024. It’s a foggy and unseasonably warm November morning in Atlanta, Georgia, just two days after the presidential election. Bastian is away from his regular perch at Delta’s sprawling campus near Hartsfield-Jackson International Airport. He is at what has become Wheels Up headquarters, just outside the perimeter of an airport most people have never heard of. DeKalb-Peachtree is the 11th-busiest airport for private jets in the U.S. There are only private jets. It has no scheduled airline service. Bastian will hold a town hall meeting in a little while, with a bit of pep talk, a pat on the back, and encouragement. He shares his Delta story of how the airline flew from bankruptcy in 2005 and mediocrity after its merger with Northwest Airlines to world-class. “Keep climbing,” the Delta slogan, he tells the troops. “We’re on the right path. We’ve made enormous progress,” Bastian congratulates the Wheels Up team before cutting to the bottom line. “We’ve got to eliminate the losses because that’s how you fund the future. That’s to me, job one. That’s the here and now.”

Delta Air Lines CEO Ed Bastian (left) and Wheels Up CEO George Mattson at Wheels Up headquarters in … [+] Chamblee, Georgia on Nov. 7, 2024.

Doug Gollan

Earlier in the morning, Wheels Up reported another loss but continued to make progress. It was now forecasting positive Adjusted EBITDA for 2025. Bastian was clear: That’s just another step in a long journey. Looking out at the audience, Bastian says hellos to a half-dozen familiar faces. Like Holtz, they are valued lieutenants who have been at his side during Delta’s turnaround.

Earlier in the week, Holtz shared a similar message. “I always say we are taking one extra step every day to make a customer’s life a little better. That’s what it’s all about. There’s no secret. Whether it’s 121 or 135 space, the secret to a great operation is a million little steps. If I had to write a book, it would be called ‘A Million Little Steps’ because every day, you change a little bit of something or do something a little bit different, and eventually, you get there. Even at the end of the year, you don’t even realize how much you’ve done until you look back and try to put that in a bucket and say, ‘Oh my gosh, we’ve done so much.’ In our industry, we just continue to look forward and knock those things down one at a time. I always have to stop myself to make sure we’re celebrating our successes because I’m always looking for the next thing to fix. The teams have done a ton of good work to fix a lot of things over the year and a half; I’ve been here for two years, and I’m really proud of the team,” Holtz tells me.

Before taking the stage, Bastian sits alongside Mattson in what is now the CEO’s office at Wheels Up after the headquarters was moved from Manhattan in February. Bastian has just arrived from a session downtown with around 500 Delta employees. It’s something he does a dozen times a year in the carrier’s home city. The building that now houses Wheels Up was a warehouse converted last year as a central operations center. It consolidates functions that were spread across more than a dozen locations in three time zones, the product of its acquisition spree. Although the place has an airy and open, modern industrial feel, you enter through what was once a loading dock. In addition to executive offices, it mirrors the same layout on a smaller scale as the operations center at Delta. Holtz sketched out the floor plan on the back of a napkin.

The Wheels Up Members Operation Center in Atlanta, Georgia. COO Dave Holtz sketched the layout on … [+] the back of a napkin. It mirrors Delta’s operations center where he led the carrier’s operational renaissance.

Doug Gollan

Bastian and Mattson recap what has been a challenging journey. Asked how the deal to sell Delta Private Jets came about, Bastian relates the history of what is simply referred to as DPJ in the industry. “We had DPJ for many years, and it came out of Comair (a commuter airline Delta fully bought in 1998). They did a big deal with Bombardier. They were the original CRJ (regional jet) operator in the airline days. They bought the CRJ-100s and then the 200s. They had a couple of private jets. They were using them to transit customers and weren’t quite sure what they were doing with them, but they got thrown into the deal. That eventually grew into a (private jet charter) business (initially branded Delta AirElite). 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). (Aircraft owners) loved the fact that you got 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. At the end of the day, I wasn’t certain it was adding the value to our brand relative to the risk and the potential management distraction it could cause. Kenny and I got together in 2019 and spent the year together. He was looking to grow.”

As Dichter had done with then-NetJets Chairman and CEO Richard Santulli back in 2000 and 2001 when he launched Marquis Jet, he worked Bastian tirelessly until he closed the sale. (Wheels Up declined to make Dichter available for this story.) There were plans for marketing cooperation. Wheels Up would be able to lean on Delta for support, and Delta would funnel customers who wanted something beyond first class onto Wheels Up’s private airplanes. Wheels Up members could use their jet card funds to buy Delta tickets. They could also gain Diamond status in the Delta loyalty program based on funding their Wheels Up accounts.

The deal closed in January 2020, and within weeks, Bastian faced the biggest crisis in aviation history. “Kenny had the idea that he would work together with one of the big commercial airlines and try to figure out, is there something to do together? He was particularly interested (in Delta) 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,” Bastian recalls, adding, “We got paid, plus we wound up getting a 28% interest in the new company. We had the intention to do what George is doing today, except that Covid got in the way. Early in 2020, right after we closed the deal, we shook hands and said good luck.”

Halcyon Days
“Now is a unique time to attract new users as the cost (of acquisition) may be lower” – McKinsey study on opportunities for private flight providers

Private jets took off as Covid grounded airliners and turned airports into ghost towns. A McKinsey study commissioned by Ricci at the beginning of the pandemic found that 90% of the HNWs who could afford to fly privately had previously decided to keep the money in their bank accounts. The addressable and largely untapped market was between a million and a million-and-a-half well-to-do households in the U.S.

Delta Airlines flight 958 on March 20, 2020, from Atlanta to Melbourne, FL, prepares to depart with … [+] only a handful of passengers on board due to the spreading coronavirus pandemic.

getty

Getting the kids home from college, visiting second homes, ensuring elderly parents and children with medical conditions weren’t exposed to the deadly virus, and social distancing was only possible on private jets. It created a tailwind, then a wind tunnel of new customers that would end up more like a hurricane. By the July 4th weekend in 2020, private jet flying had recovered from nearly zero to the same level as 2019. With airlines largely grounded, at one point in 2020, Delta’s pre-IPO stake in Wheels Up was worth nearly twice the value of its 9% interest in Air France-KLM, one of Europe’s three largest airline conglomerates.

“At that point, (Delta) was just trying to stay alive, and our business went through the floor,” Bastian says, noting, “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, 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.”

Private jet travel surges as HNWs seek to avoid contact with large groups as the Covid pandemic … [+] continues. They use private jets to visit relatives and second homes. By July 4th weekend of 2020, volume is back to pre-pandemic levels.

Doug Gollan

The CARES Act was passed on March 27, 2020. It provided billions of dollars in payroll support for both public and private airlines. It also waived the 7.5% Federal Excise Tax on charter flights, which includes jet cards. Before it expired in December, flight providers concluded that if you funded your jet card before the stroke of midnight on New Year’s Eve, those funds could be used tax-free even after the CARES Act was over. Everybody likes a deal. HNWs were wiring hundreds of thousands of dollars, sometimes millions, for future flights.

It was halcyon days for an industry that had spent a decade in the doldrums after the financial crisis. 2021 would be a record year for charter and fractional flights, a record broken again in 2022 before falling back 4.6% in 2023. In July 2021, Dichter rode the favorable climate for private flights and SPAC mergers onto the New York Stock Exchange. Unlike other SPACs, Wheels Up had actual revenues. Investor thinking at the time valued growth over profits. Wheels Up had become a major industry player in less than a decade. Based on Google searches, its brand awareness was the same or even a bit higher than that of NetJets, which was three times bigger. It also had a swath of detractors who felt its celebrity-driven high profile and growth at the expense of profits were bad for the industry. The industry is officially called Business Aviation. For understandable reasons, much of the industry prefers the image of those suit-and-tie executives heading to a remote factory location on a business jet.

Jan. 2021 – Despite Covid, charter and fractional flight hours rebound quickly and end the 2020 year down just 16% from 2019.
Jan. 5, 2021 – Wheels Up acquires Mountain Aviation, the 10th-largest U.S. charter operator.
Feb. 1, 2021 – In its pre-IPO Investor Day presentation, Wheels Up estimates a “democratized” private aviation market could grow from $30 billion to $80 billion. Accessing 1,200 aircraft from third-party charter operators when it needs extra capacity to supplement its owned, leased, and managed fleet of over 330 charter aircraft would allow it to take advantage of the Covid surge in private jet travel. It showed revenues had doubled from $332 million in 2018 to $690 million in 2020. However, Adjusted EBITDA loss had increased from $14 million to $52 million. Projections called for an $8 million profit on that basis in 2022 and $120 million by 2024.
July 2021 – Wheels Up surpasses 10,000 members, showing year-over-year growth from 7,172 active members to 10,515 at the end of Q2.
July 14, 2021 – Wheels Up completes a SPAC merger with Aspirational Consumer Lifestyle Corp. It begins trading on the New York Stock Exchange as UP, with Dichter ringing the bell. It changes its formal name from Wheels Up Partners Holdings to Wheels Up Experience, reflecting its broader ambitions.

Most analysts rated Wheels Up as a buy, mainly based on its positioning as private aviation’s disruptive version of Airbnb, Amazon, Netflix, or Uber; take your pick. There were no other private aviation companies with which to compare. Analysts predicted its stock price could double within 24 months. Barrington’s Gary Prestopino noted it wasn’t a blank check despite the optimism. “Can they hit their projections? Can they improve efficiency? We’ll be watching the execution,” he told me back then.

Wheels Up executives celebrate their listing on the New York Stock Exchange on July 14, 2021.

Wheels Up

In Columbus, that tailwind of new customers mixed with the difficulties of operating amid pandemic restrictions was starting to feel more like wind shear. On June 14, NetJets pulled its Classic jet card, which allowed customers to book flights with as little as 10 hours’ notice. It turned the 45 peak days on its Elite jet card into blackout dates. NetJets President Patrick Gallagher said, “With daily flight volume returning faster than industry predictions and record-setting demand from new owners, we felt it necessary to take a major step to protect our service delivery.” In August, NetJets halted remaining jet card sales and renewals. Most of the major players followed, with some shuttering their programs altogether.

Aug. 23, 2021 – Market leader NetJets says it has stopped selling all new jet cards and renewing existing customers as it struggles to handle the surge in Covid demand for private flights.
Sept. 30, 2021 – Jet card inventor and major player Sentient Jet stops selling jet cards to new customers. Its CEO, Andrew Collins, says, “We want to have our 100% focus on existing customers.”
Nov. 28, 2021 – ARGUS Traqpak records 13,192 departures, the highest number of U.S. single-day total.

As others closed the hangar doors, assessing how to handle the hurricane of new flyers, Dichter responded, saying, “We have made the strategic decision to invest in the growth of our business while some industry participants are pulling back. This gives us even more conviction and confidence to pull forward.”

By the end of the year, Wheels Up had $784 million in cash —although it owed $935 million worth of future flights from member deposits. When the 2021 financials were released, they showed that net loss had grown from $85.4 million in 2020 to $197.2 million in 2021. Adjusted EBITDA loss grew from $52.4 million to $87.4 million.

Rapid Descent
“Anything you planned, you were wrong by the afternoon.” – Bastian, recalling the early days of navigating Covid to Chief Executive magazine after being named CEO Of the Year in 2023

When it released its final 2021 numbers in early March of 2022, Dichter wrote in the annual report, “Going forward, we see tremendous opportunities to invest in our customer base, expand our supply network, further develop our global marketplace and service a much larger overall addressable market. Our balance sheet — with significant cash-on-hand at year-end, essentially no debt and strong borrowing capacity — is a powerful advantage, and we expect to deploy it to deepen our competitive moat.”

Jan. 2022 – Charter/Fractional flight hours increased 52.1% to a record 2.79 million hours in 2021 compared to 2020, per ARGUS Traqpak.
Feb. 4, 2022 – As it struggles to handle demand, Wheels Up makes its final operator acquisition in the Dichter era, buying Alante Air Charter.
Mar. 10, 2022 – Wheels Up’s 2021 earnings release reveals it sold $540 million in prepaid jet card deposits in Q4 2021. Annual 2021 revenues hit $1.19 billion, beating expectations, as Adjusted EBITDA loss grew to $87.4 million compared to its Investor Day forecast of negative $29 million. Net loss climbed from $85.4 million in 2020 to $197.2 million in 2021. Losses accelerate from inefficiencies in sourcing flights from its multiple airlines that must be operated separately per FAA regulations and the expenses of paying third-party operators more than the guaranteed contracted rates it charges members. Separately, Wheels Up announced that Delta SVP Operations Dave Holtz joined Wheels Up as Chairman of Operations.
Mar. 30, 2022 – Wheels Up announces a partnership and minority investment in Tropic Ocean Airways, where the chairman is George Mattson
Apr. 1, 2022 – Wheels Up closes on its widely panned acquisition of charter broker Air Partner, PLC, at the cost of $110 million, although it would later be a vital leg of the Delta-Wheels Up strategy

Although sales beat expectations and the company expanded capacity by continuing to acquire other charter operators, all was not well.

A separate announcement on the same day as the 2021 results was titled, “Wheels Up Adds Aviation Veteran Dave Holtz as Chairman of Operations.” Holtz, in fact, was at Wheels Up at Bastian’s request. A 40-plus-year veteran of Delta who is widely credited for making the planes run on time at the big airline, in the Fall of 2021, he was edging towards retirement, turning over the reins of the airline’s beating heart, its massive operations center near Jackson-Hartsfield. Holtz recalls the phone call. “Ed asked if I would peek under the tent at Wheels Up and see what was going on over there. He said, ‘I’ve got several friends that fly them. The experiences have been both good and bad, and they’ve grown rather quickly. There’s a lot going on.’ He told me Kenny would appreciate it if I came to look.”

Despite the challenges Covid created for the travel industry, Bastian was still tracking Wheels Up. “We had (Delta SVP) Gail Grimmett in New York (at Wheels Up’s then headquarters), who was staying close. 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. I asked Dave 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 (that) we’ve merged with, Delta-Northwest and 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.”

In a separate interview, Holtz recalls, “I went over and had a few meetings with Kenny, who I came to love. Kenny put together a great model, a great growth model, and they were going gangbusters during Covid, and it expanded quite quickly…It was the greatest job in the world. You can peek under the tent and go anywhere. You can do anything; you can attend the board meetings. You get all the insights from all the leaders, and you have no direct reports, so I thought, damn, this is a pretty good job.

Wheels Up COO Dave Holtz (left) discusses the private jet companies new centralized Members … [+] Operation Center, still under construction, in April 2023.

Doug Gollan

“Kenny understood (the challenges) very well as they were buying companies through Covid, and they needed that lift to satisfy the demand that was out there. But they also realized that the operational system’s complexity was something that would eventually bog them down. To their credit, early on, when they brought me in, the first thing I recommended, and they already knew it, was we had to combine these operating certificates and get down to one certificate. We had to find a home. We had to start to drive decision-making to a centralized point. We had to treat this as one airline, not seven airlines underneath. All of that was ongoing long before the Delta investment. So, when the Delta investment came in August last year, we already had the (Members Operation Center and now Wheels Up headquarters in Atlanta) up and running,” Holtz says.

It would be challenging work. “Covid magnified everything. We were combining six or seven ops centers that were working remotely for the most part. I couldn’t even go visit because there were only a few people working in the office,” Holtz continues, adding, “So, we’re here; we are trying to build something, combining people who are working from home, which is not easy, all while there are problems that you would normally incorporate while doing that. It was much more difficult to get everything combined and up and running, and it’s probably taken us a little bit longer than it should have.”

In the early days when the fleet was operated by Gama Aviation Signature, the member services team in Ohio would exchange emails back and forth with Gama’s operations team in Connecticut. A customer wanted to change the departure time. That was an email to Connecticut. The confirmation was an email back to Columbus. There was an email for every change, from catering to adding or removing passengers. Each change, adding weight, reducing weight, changing departure time, where changes in temperature impact aircraft performance, created a string of activity, much of it tracked manually on spreadsheets. It was not dissimilar to how much of the industry worked and still works. It worked fine before the tailwinds turned into a storm. That was partially self-inflicted.

The success of the Wheels Up sales and marketing machine mirrored how warm waters fuel a hurricane, making the task of running a half dozen separate airlines nearly impossible. Costs ballooned as the company struggled to integrate the acquisitions, which had to operate as separate entities based on the rules of the highly regulated industry. In some cases, when there were airplanes, there weren’t pilots. In other cases, when there were pilots, they had yet to undergo operator-specific mandatory training even if they had thousands of hours flying that aircraft for one of the company’s other operators. Pilots would tell members, “I’m sorry, our airplane has a mechanical,” and then explain why they weren’t permitted to fly the same aircraft type from another Wheels Up-owned operator parked nearby. Other times, when there were mechanics, they were waiting on a part stuck in the supply chain. Sometimes, there were airplanes and pilots available. Still, with multiple charter airlines operating separately, including scheduling, dispatch, maintenance, and so forth, the company didn’t always know if they had available airplanes.

As executives returned to the office, Wheels Up’s primarily leisure-focused members’ travel bunched into Thursdays, Fridays and Sundays. Mid-week, the airplanes sat idle, with pilots paid whether they were flying or not. Wheels Up had so much demand on those busy days its fleet couldn’t handle it, meaning a scramble of calling, emailing, and texting other operators trying to charter their airplanes for its customers. Members were contractually able to book and cancel on 24- or 48-hours’ notice, and sometimes, after a member canceled the flight, that notification was never sent to a third-party operator, meaning Wheels Up paid for a flight where it received no revenue.

Holtz was unphased by the challenge. “I found a company that was a strong brand and strictly coming from Delta and that strong brand. I loved the brand of Wheels Up and what they were trying to do. Underneath the operations was a different story. Obviously, there was a lot of complexity and mixed results from expanding so quickly, but on the company side, the brand side, and the people, it was just a great company with great leadership. I believed in Kenny and the team they had in place. When I was at Delta, we said our transition was from worst the first. Really, we weren’t the worst. From 2005 to 2010, during the merger of Northwest, we were certainly less than mediocre. From 2010 through 2022, I ran the Delta operations center side and my team, and I led that turnaround. It was one of the proudest moments in my professional career, which is for 42 years. I thought, gosh, what a way to go out. That’s great. Then, the next thing, here I am, peeking under Wheels Up. I thought we might have had an opportunity to do it again. So, the next thing I’m caught up with, what I think is a great company, a great leadership team, a great brand, but not doing very well (and) here I am with that opportunity to go do it again, so that’s kind of how I fell in love with it.”

Bastian would tell the town hall how Delta cut its controllable cancelations from 6,000 to just 60 per year in under five years. Mattson would add that Wheels Up has already increased the number of Brand Days, days with no cancelations, from the teens to where it has a chance at 100 this year. Delta has around 300 Brand Days per year.

Eye Of The Storm
“[W]e were in a position where the more we grew, the more money we were losing.” – Former Wheels Up CFO and Interim CEO Todd Smith

Dichter envisioned Wheels Up as the Amazon of private aviation. It would offer preowned aircraft sales and aircraft management; it would create a marketplace for charter customers, allowing them to share flights and reducing costs so even single-digit millionaires could take to the private skies at least occasionally. Wheels Up would also use Avianis to sell technology to the long tail of small operators. Best of all, when it needed extra capacity, it would purchase it from other operators, which is what’s called going off-fleet. It is a regular part of the business for virtually any company that offers guaranteed availability. That would enable Wheels Up to accommodate extra demand without investing in more airplanes. However, there was an unanticipated hitch.

Wheels Up, like many jet card and fractional programs, guaranteed both the availability of aircraft and capped or fixed hourly rates. So long as you called a specific number of hours before you wanted to fly, the provider was obligated to get you an airplane. Members only paid for occupied hours. That’s the time they are in the air. The cost of getting the airplane to the customer and to wherever it was needed next had to be baked into that contracted hourly price. While commentary often focuses on the risk of customers losing their deposits if their provider fails, for providers to have a sustainable model, they must fulfill those flights for less than what they are charging, plus cover overhead.

Former Wheels Up CFO Todd Smith served as Interim CEO during the Summer of 2023 as the private jet … [+] company navigated a narrow path to avert bankruptcy.

Wheels Up

In 2019, Wheels Up went national, making the Continental U.S. and a few popular destinations in Canada, Mexico, and the Bahamas part of what is called a primary service area, or PSA. That’s the region where those guarantees apply. Like the Marquis Jet days, Wheels Up had grown quickly. Using other operators as needed wasn’t an issue either. In the years since Dichter sold Marquis Jet to NetJets, the industry had been in the doldrums. It’s referred to as “the lost decade.” It wasn’t until 2017 that the sector surpassed its 2007 peak; the Great Recession slashed flying by 26% in 24 months.

Guaranteed jet card programs sprung up like weeds since there was never a problem finding an available charter aircraft. Jet card sellers, many pure brokers, knew they could play operators against each other to get lower prices. Now, in 2021, Wheels Up found itself flying lots of empty leg repositioning flights across the sparsely populated Midwest and Pacific Northwest. With demand at record levels, when Wheels Up went to other operators, it found itself paying more than it was taking in. To its credit, Wheels Up never used force majeure or other fine print to change contract terms, but it paid the price.

The losses grew deeper. By April 28, 2023, CNBC reported that Wheels Up was exploring strategic alternatives. On May 9, 2023, the day Dichter stepped down as chairman and chief executive, the cable business channel reported, “Wheels Up has been consulting with bankruptcy advisors and attorneys about possible capital raises or a restructuring.”

CFO Todd Smith, a GE veteran who joined the previous June, was elevated as Interim CEO. Ravi Thakran, a board member and the CEO of Wheels Up’s SPAC partner, who would soon exit, was made chairman. A search firm started looking for a new CEO.

May 12, 2022 – Q1 revenue increased 24% from $261.7 million to $325.6 million year-over-year. Adjusted EBITDA went from an $8.7 million loss to a $49.4 million loss year-over-year; Q1 Net Loss increased to $89.0 million from $32.2 million year-over-year; Q1 Operating Loss increased to $92.7 million from $27.7 million year-over-year; Cash and cash equivalents dropped to $537.7 million at the end of Q1 from $784.6 million at the end of Q4 2021, partly driven by acquisitions; Prepaid block sales grew 153% in Q1 to $175 million year-over-year.
Jun. 23, 2022—Longtime GE finance executive Todd Smith joins Wheels Up as CFO. Less than a year later, as Interim CEO, he guided the company along a narrow path to survival.
Oct. 17, 2022—Wheels Up nets $259 million via sale and issuance of equipment notes. It announces consolidated operations in a new facility in Atlanta to open in 2023.
Jan. 2023 – Charter/Fractional flight hours grow to another record, up 5.7% to 2.95 million hours in 2022, per ARGUS Traqpak. A survey of Private Jet Card Comparisons subscribers would later show members who ranked Wheels Up Excellent/Very Good had fallen from 76.5% to 59.%. 24.1% ranked Wheels Up average, up from 9.8%. Below Average/Poor rankings increase from 0.0% to 13.0%.

For Smith, it had already been a challenging period. While he came to Wheels Up via a recruiter, he had worked with and was friends with Delta CFO Dan Janki, another GE alum. After leaving the private jet airline in September, Smith, now CFO at a division of CVS tells me, “When the opportunity came up, I did talk to Dan, and certainly had his perspective and understanding. One of the reasons that I was interested was the opportunity to work with him again. I knew Wheels Up had grown quickly. It was about a billion and a half on the top line. It had a large membership base. It was obvious that it had some of the growing pains of being a newly public company.”

His assessment of finances was like what Holtz saw in operations. “It needed better operational and financial discipline. I expected that there were a number of challenges that I largely would equate with being an immature public company. I also recognized that it had a strong brand. It had grown and achieved a level of scale that was meaningful. I thought my background and some of the things I had done in my 25-year GE career could be helpful in terms of operating discipline and financial discipline,” Smith says.

Like Holtz, he quickly came to appreciate the ready-to-conquer-the-world attitude Dichter had built. However, there was a problem. Smith recalls, “There was a more significant challenge with regard to the business model itself. Within two or three months (of joining), I came to understand that the business model was, to some degree, structurally impaired. What I mean by that is that we were in a position where the more we grew, the more money we were losing. That was really a result of how the product offering had been put together. It was a function of the fact that the guaranteed availability product (with capped rates) that had been so well received in the market it had led to a growing membership level. A lot of those members were individual flyers, which created an extremely compressed demand profile around Fridays, Sundays, and the weekends.”

The result, Smith says, was, “Quite simply, the business had acquired a lot of smaller operators to try to meet that maximum required demand on those peak days. At the same time, they had a very expensive operating model with a lot of aircraft that, on the other four or five days of the week, were heavily underutilized. The resulting implication of that was a cost profile that was significantly greater than the revenue that was being generated. That resulted in losses for the company. In the first few months, I could see that we had to address the business model. The other problem that started to develop as we went into the second half of (2022) was that we had also funded the growth of the business via a prepaid block funding model. We had become critically dependent upon that and had allowed that deferred revenue liability to become way too big. I started to become concerned about the balance sheet and our ability to generate enough cash flow and liquidity.”

The financial picture was souring. “We did our first debt deal in October of 2022 (taking out a loan that generated $259 million of cash by mortgaging aircraft it owned). As I looked forward, we started having discussions with the board about the viability of generating enough cash flow. We recognized as a risk that if the market started to slow down or contract, the outflows associated with that guaranteed model would be more significant than the inflows of new customers and new blocks. We were starting to have those conversations with the board in the fourth quarter of ’22 and recognized that as a risk as we went into the beginning of ’23. At that point, we started to make a lot of changes, trying to take costs out, trying to be more thoughtful about how we grew, and being more selective about that growth. Then, as we got into 2023 and the market started to slow down, we started to see those pressures exacerbated. That required more significant action regarding the product changes and deeper cost cuts. We did a more significant evaluation of the size of our controlled fleet and the overall business model.”

In early 2023, Wheels Up began testing a regional program east of the Mississippi with its King Air fleet, where the denser population centers meant shorter repositioning flights and a faster window to get a backup aircraft in place when there was a maintenance-related delay. It was a precursor of changes to come.

While it wasn’t apparent to outsiders, Smith says the Delta connection remained strong, especially as the big airline was then pulling out of its own crisis. “We always had strong support from Delta. I was talking to Dan frequently. We were having regular meetings with Ed and other members of the Delta leadership team. Their involvement at that point was more representative of a company that had a 20% minority equity stake. They were supportive. They were advising us. They recognized that we were a standalone public company, so we were appropriate about their level of involvement.”

Asked if Wheels Up should have followed others in changing rules and unlocking rate locks mid-contract, Smith says, “I don’t think so. We never tried to forget or deprioritize the importance of supporting our members. Ultimately, that was what was going to sustain us and get us through. Our members could have walked out. They could have given up on it. They could have said, ‘Hey, not worth the risk. Not the best operational performance,’ but so many of them stuck with us. I think they did that because they recognized that when others may have looked for ways to put some pressure on them and to use them, and the contract changes to improve their situation, Wheels Up stuck by the members. That was one of the key elements that got us through. I think that was, at the time and in hindsight, absolutely the right decision.”

In part, that was true. What was also true was as competitors tightened the rules, raised prices, and imposed more peak days and surcharges, when Wheels Up would follow, instead of implementing the changes across the board to all members and joiners with immediate effect, it would allow new and existing members a window to lock in the existing rule set and rates by depositing more funds. Depending on how much they wired to Wheels Up, they could lock those terms in for up to 36 months. Competitors saw it as a cash grab to keep the lights on. However, it was often a more calculated decision for customers. Wheels Up was thousands of dollars cheaper for shorter flights and as much as $30,000 less each way for transcontinental flights than other big players.

Sophisticated HNW customers understood that Wheels Up operations needed to improve, but they also knew all providers were having issues. Not having enough air traffic controllers and ground staff at FBOs impacted everyone, as did parts shortages, causing maintenance delays. 55.3% of Private Jet Card Comparisons subscribers in 2023 would cite increased prices as the top reason they were considering leaving their provider, compared to just 27.4% for Wheels Up members. Wheels Up members’ top reasons for exiting were declining customer service (50.0% vs. 31.5% industry average) and delays, changes, or cancelations (48.4% vs. 37.4% industry avg.).

Concerns about financial stability, which wasn’t offered as a check-the-box option, popped up in the comments section. Jet card deposits in Q1 2023 were just $100 million, down year-over-year from $175 million. 2022 Q4 block sales had been $346 million, down from $546 million in Q4 of 2021. Despite the $259 million in cash from the equipment notes issued in October, cash and cash equivalents had gone from $586 million to $363 million when Wheels Up reported its Q1 2023 numbers on the date Dichter stepped aside.

Ides of March and May
“I think there’s a good chance some people are going to be disappointed later on.” – Warren Buffett speaking about Wheels Up members

As Smith had expected, the bloom was off the rose. Part 135 flying in January 2023 was down 5.7% year-over. February saw an 8.4% drop, and March followed with a 12.0% decline compared to 2022.

While NetJets and Flexjet had stopped selling jet cards in 2021, they were still selling fractional shares, with one big caveat. They had also stopped the interim leases that allowed buyers to fly on the same terms as the fractional aircraft they had bought. That meant many of their customers bought jet cards in the six- to 18-month period, and they had to wait for their aircraft to be delivered and their contracts to begin. Those jets were now arriving. However, operational pain points continued. Supply chain issues were still roiling the industry. Pilot pay was spiking as private jet companies had to compete for hiring with the big airlines.. On March 2, 2023, Wheels Up announced its first-ever layoffs, designed to cut $30 million in costs.

After fielding a question about See’s Candies and NetJets, Warren Buffett tells shareholders at the … [+] Berkshire Hathaway annual meeting, ““(Wheels Up has) 12,600 people who have given them over a billion dollars on prepaid cards…and I think there’s a good chance some people are going to be disappointed later on.” The session is being broadcast live on CNBC. Photographer: Dan Brouillette/Bloomberg

© 2024 Bloomberg Finance LP

“That was a challenging period of time,” Smith says, adding, “We were spending a lot of time internally as a management team and with the board discussing different alternatives, evaluating the business model, looking at what were the key path items that we needed to execute that could improve our situation. We were running a lot of scenarios, quite frankly, and just trying to figure out what options are available to us. We were obviously watching our cash and liquidity position closely. We were obviously still trying to serve our members well and make sure we were delivering operationally. We were starting to put more of a strategic lens on what were some alternatives in the business. As we got into early May, we started making the product changes. We started to be more successful in getting some of the costs out and other things. We felt like we had the beginnings of the right changes to improve the business model, but we also knew that we needed to likely raise some additional capital to fully execute that plan.”

· Mar. 2, 2023 – Wheels Up plans $30 million in savings via non-operational headcount reduction

· Mar. 9, 2023 – Wheels Up revenues for 2022 again beat expectations, hitting $1.58 billion for the year (compared to its Feb. 2021 Investor Day forecast of $1.14 billion). Adjusted EBITDA loss swells to $185 million (compared to the Investor Day forecast of $8 million in Adjusted EBITDA profits). Net loss was $555.5 million.

· Apr. 14, 2023—Wheels Up receives a delisting warning from the NYSE after its shares traded below $1 for 30 days. The company later regained compliance via a 10-to-1 reverse split.

· Apr. 28, 2023 – CNBC reports Wheels Up is exploring strategic alternatives, including going private.

· May 6, 2023 – During Berkshire Hathaway’s annual meeting, Buffett, responding to a question about NetJets, says, “(Wheels Up has) 12,600 people who have given them over a billion dollars on prepaid cards…and I think there’s a good chance some people are going to be disappointed later on.”

· May 9, 2023 – As losses mount, Dichter resigns as Chairman and CEO. CFO Todd Smith becomes Interim CEO. He announces a plan to shrink to profitability, cutting areas of the Midwest and Pacific Northwest where it offers guaranteed pricing, impacting about 20% of its flying. Its Air Partner broker will fill the gap with dynamic pricing, where it can mark up each trip to make a profit. Despite the red ink, Wheels Up will honor all member agreements impacted by the change through their duration, meaning more loss-making flights for up to a year. Smith says the changes, including cost-cutting, will enable Wheels Up to reach positive Adjusted EBITDA by the end of 2024. He also mentions a new initiative, using Delta’s corporate sales team to pitch flights on Wheels Up.

· May 15, 2023 – A new Wheels Up operations center, led by Holtz, opens in Atlanta.

· May 17, 2023 – During a Q&A session at the Wings Club in New York, Bastian is asked by CNBC’s Phil Le Beau if he regretted the Wheels Up deal. The Delta CEO responds, “The team there is very much on getting to profitability. They grew a great revenue stream…They’re currently operating four or five different certificates and operating as separate airlines, and you think about the inefficiency and the inability to actually leverage staff and resources at scale in the face of high demand. It has been very frustrating coming through the pandemic…I support what they’re doing.”

On May 6, as the Berkshire Hathaway annual meeting, which is broadcast live on CNBC, was winding down, a shareholder asked Buffett his take on See’s Candies and NetJets. After praising NetJets CEO Adam Johnson and comments from the late Charlie Munger that NetJets was worth as much as a major airline, Buffett quipped, “(Wheels Up has) 12,600 people who have given them over a billion dollars on prepaid cards…and I think there’s a good chance some people are going to be disappointed later on.”

I asked Bastian what he thought about Buffett’s comments when he heard about them. “I didn’t appreciate it, of course, because I know Warren very well. He’s selling NetJets,” Bastian told me. I asked, “Did you call him at all?” Bastian stayed engaged but measured. “No. I didn’t want to do that to him,” said. With one more go, I asked, “Have you talked to him since that?” Bastian answered, “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.”

While Dichter was gone from his executive positions 72 hours later, he stayed on the board, and it was now Smith, a relative newcomer, who had his hands on the yoke. But as NetJets did 15 years before, when it went into a financial tailspin, Smith and Wheels Up had a powerful friend, the next best thing to Warren Buffett, in this case Ed Bastian.

In the middle of May, the 17th to be exact, the Delta CEO was speaking to members of The Wings Club in Manhattan. The club dates back to 1942, and its audience is comprised of aviation executives and those who do business in the sector: bankers, lawyers, and consultants. It’s a place where blue and gray suits, white shirts, and a solid blue or red tie never went out of style.

A couple weeks later, as the death watch for Wheels Up was gaining steam, I read a story in Corporate Jet Investor about Wheels Up’s sales initiative with Delta that Smith referenced in his first earnings call back on May 9th, the same day Dichter resigned. I had been intrigued on his first day in the corner office, Smith referenced a new initiative with Delta targeting its corporate accounts. It seemed odd that a company like Delta would be pitching a company like Wheels Up to its best customers unless Delta was going to be there to foam the runway.

Smith told me, “We wouldn’t have ever said anything about the Delta relationship with us that we didn’t run by with them and get their approval on. At the same time, we were very thoughtful. We weren’t suggesting in any way that, at that point Delta was providing any backstop or guarantee. We were simply saying that we were exploring a program with them that was focused on commercial accounts. It was a bit of a test case, and I was saying, ‘Hey, look, can we start to get some things going here that will prove out some of the assumptions in our model? Can we make that offering work? Is there value Delta’s commercial customers see in having access to Wheels Up?’ That was really what we were trying to position. We were very thoughtful not to suggest that it was anything more than that, and at that point in time it wasn’t anything more than that.”

The Corporate Jet Investor report that ran on June 3 also mentioned Bastian had made some positive comments about Wheels Up at the Wings Club meeting. Luckily the session was recorded. It was a Q&A with CNBC’s Phil LeBeau peppering Bastian with questions. In was his very last question before going to the audience, LeBeau asked Bastian if he regretted the Wheels Up deal. It could have easily not been asked since the session was wrapping up.

“Did you know the last question was going to be about Wheels Up,” I asked Bastian. The answer was no. “He asked you, ‘Did you regret Wheels Up?’ I think a lot of CEOs would have tried to defer, but you leaned into it,” I said. It was a poorly formed question, but Bastian responded, continuing, “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 $500-million bailout is going to turn into one of the great financial investments Delta has ever made.”

I wanted to know if there was already a plan in place to save Wheels Up back in mid-May. “Did you know, when you’re answering the question, that you’re going to find a way to figure things out?” Bastian, who had jumped ahead, asked me, “In May?” “Yes,” I told him. Bastian chuckled. The answer was “No.” He continued, “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.”

During that period, numerous Wheels Up executives were heading for the exits. I asked Smith what he thought when he heard about Bastian’s Wings Club remarks. He told me, “We took the comments very positively. I don’t think at that point that we knew or that Delta had made any decisions about what level of support they were necessarily going to provide. As we started working through the business plan, some of the fundamental concepts of that business plan were rooted in getting to a more balanced revenue profile. The theory was that if we more evenly spread the demand across all seven days through a combination of individual leisure travelers and corporate travelers, we could generate the capacity we needed from a smaller fleet and a smaller fixed-cost position relative to the balance sheet. Part of that was saying, ‘How do we get traction and grow the corporate business?’ Delta was an obvious relationship that we felt could be critically helpful to us in achieving that. They have over 40,000 corporate customers. We started to work through this thought process that said, ‘Hey, is there a combination here that we could leverage some of that relationship and credibility that Delta has with its customer base to gain some traction there and accelerate that business model.”

Cruel Summer
“There are some people that run from the fires. We run towards the fire. This was certainly a fire.” – Ed Bastian on the deteriorating financial situation at Wheels Up in 2023

By June, Wheels Up’s stock price was in danger of dropping below the one-dollar mark again. Media coverage was brutal. On May 16, the Financial Times dropped a story, “Private jet disrupter: the debt-fueled ascent of Thomas Flohr’s VistaJet.” It only highlighted the risk side of jet card deposits if your provider failed.

While VistaJet is privately held, Wheels Up, as a public company, had its kimono open for pundits to pick apart. Across LinkedIn and Reddit, keyboard analysts were dissecting its financials and operating data and concluding, like the Titanic, it was a mathematical certainty that Wheels Up would sink. Cash was down to $363 million, dropping by $223 million in the first 90 days of the year. On June 22, The Wall Street Journal reported Wheels Up had hired Kirkland & Ellis for restructuring advice.

· Jun. 22, 2023 – The Wall Street Journal reports Wheels Up has hired Kirkland & Ellis for restructuring advice.

· Jul. 6, 2023 – Portside acquires licensing rights for Avianis as the start of unwinding the Wheels Up super store of private aviation

· Aug. 9, 2023 – Delta provides a short-term capital infusion as Wheels Up announces it will sell its aircraft management business to Airshare

· Aug. 14, 2023 – Wheels Up announces its delayed Q2 financials. YOY revenue drops 21% to $335.1 million as YOY Net Loss increases from $92.7 million to $160.6 million. Adjusted EBITDA loss improves from $46.9 million to negative $40.3 million.

In an industry where unions regularly want the head of the CEO as the price for labor peace, and having seen United Airlines drop its plans for a massive private jet airline after 9-11 to assuage its unions, I asked if Bastian was concerned that if he let Wheels Up crash, was he thinking that it could be hard to get back into private aviation in three or five years? For a CEO who, at age 67, could easily glide towards an exit on his terms, preserving his legacy, his answer was a straight yes. Bastian continued, “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.”

Was Bastian concerned about liability from Wheels Up members who had been told they could use funds to buy tickets on Delta. “Sure, absolutely. It was part of it. It wasn’t the main reason, but it was part of the consideration.”

I asked, “When did you start to get to the point where you thought there might be a financial issue?” He says, “We were watching performance and we’re certainly seeing the reliability start to materially degrade. 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.”

Bastian continues, “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’s 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.”

Art of the Deal
“We’ll give you as much money as you want, as long as you promise not to give it to Wheels Up.” – Ed Bastian on the response of potential investors

Jet card deposits, or block sales at Wheels Up calls them, were down to $96 million in Q2 2023, a drop from $333 million the previous year. While that wasn’t public information, as Wheels Up didn’t report its earnings until mid-August, cash was running perilously low.

I asked Smith, “How close was Wheels Up to filing for bankruptcy?” He said, “It was certainly a consideration and a scenario that we evaluated for the board, but we were fortunate that we were able to work out a deal and it never materialized. Primarily, it was a risk scenario, and that in good governance, we evaluate along with a number of other scenarios.”

Would Wheels Up have filed for bankruptcy if you hadn’t secured the Delta-led deal? Smith said, “We were in talks with a number of other potential investors, so I’m not sure I would go so far as to say it was the only option. However, it would be fair to say, that Delta’s involvement in some form – it could have been less than it ultimately was – was a key consideration for most of the potential investors we were meeting with.”

What were the other options? Smith said, “Other scenarios for us were different variations of our business model. I would describe it as, ‘Do you continue with a controlled fleet? Do you move to only operating as more of a third-party operator?’ We had a very strong Air Partner (charter brokerage) business that was always going to be a cornerstone. Then, there were just multiple variations in terms of the size, scope, and scale at which we would have a product offering. We were trying to find the sweet spot between a controlled fleet and a third-party fleet. What’s the right mix of revenues between corporate and individual? What’s the right mix of programmatic versus ad hoc? Variations of those elements were really the different scenarios that we were working through and modeling.”

The big airlines have used bankruptcy for decades to reorganize, with creditors allowing frequent fliers to retain their miles and loyalty. Would something like that work with a jet card airline? Smith said, “The thing that made a scenario like that challenging is that typically, in a scenario where companies avail themselves of that type of restructuring, they do so to seek relief from their creditors. Normally, their creditors are suppliers or lenders. In our situation, our largest creditor were our members who had a prepaid deposit balance with us that they had provided. In a restructuring scenario where you in any way damaged your customer base, it would be very difficult to then come out on the other side with a sustainable business. That was certainly not an alternative that we were pursuing or felt was going to be a favorable scenario for the business.”

It was apparently all or nothing. Find money or else.

Bastian told me, “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.’”

In January, Delta was ranked 11th, the top-rated airline in Fortune’s list of the “World’s 50 Most Admired Companies.” Here it was in early August last year. The CEO was running into the burning house. Bastian wasn’t giving up. He told himself, “Okay, this is going to be a challenge, but we like challenges.”

· Aug. 15, 2023 – Delta announces it is leading a $500 million investment package with Certares LP, Cox Capital, and others allowing Wheels Up to avert bankruptcy.

How did the deal come together? “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. 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 $500-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.”

Captain Smith
“[P]eople have loved to hate on Wheels Up over the last couple years.” – Jessie Naor of the VIP Seat podcast

Just before one in the afternoon on the East Coast on August 15 last year, a press release from Delta Air Lines crossed the wires. The headline read, “Delta, Certares and Knighthead accelerate Wheels Up business transformation with expanded strategic partnership.” It offered three subheads: “No. 1 premium airline joins travel and tourism investment firm Certares and deep value and turnaround investment firm Knighthead in a non-binding agreement in principle to co-lead a $500 million facility; The lenders will receive newly issued Wheels Up Class A common stock resulting in the lenders owning approximately 95% of the pro forma equity of the company on a fully diluted basis; Expanded partnership with Wheels Up would include deep travel expertise and resources to drive strategic, operational and customer service improvements.”

Before the deal closed on Sept. 20, Delta would provide $70 million to Wheels Up in short-term notes. While the deal meant existing Wheels Up shareholders would take a haircut, employees were still employed, and members were still whole and able to fly. It also saved a glut of nearly 200 airplanes from coming onto the market in one fell swoop, something that would have certainly impacted prices in the preowned segment.

Six days earlier, the results of the search for a new CEO at Wheels Up were announced. Delta Board Member George Mattson was moving to the corner office.

· Sept. 14, 2023 – After an external search, longtime Delta Board Member George Mattson named Wheels UP CEO.

· Sep. 20, 2023 – Wheels Up closes on financing after Delta advances $70 million during August and September per 8k filings.

· Sep. 22, 2023 – Dichter exits the Wheels Up board along with SPAC partner CEO Ravi Thakran who served as Interim Chairman.

Mattson first met Bastian in the late 1990s. Mattson was working at Goldman Sachs. Bastian was the controller at Delta. It’s a relationship that has only gotten stronger over the past quarter century as both men rose through the ranks. Mattson’s exit from Goldman Sachs in February 2012 as partner and head of its global industrials group was newsworthy enough that The New York Times covered it twice in 12 hours, first reporting, “Top Senior Goldman Executive Is Said to Be Set to Retire,” and then quickly following up, “Goldman Names Successor for Top Deal Maker.” The first article described Mattson as a “top producer” who worked on “a number of prominent deals.” On Oct. 1 of that year Delta announced his appointment to its board. At that point, Bastian was president and a board member, although he wouldn’t become CEO until 2016.

So, what happened with the search firm? Did Mattson lose a bet with Bastian? After all, the industry joke was that being named CEO of Wheels Up was akin to being named captain of the Titanic after it hit the iceberg. Former GrandView Aviation President Jessie Naor, who now has a podcast called The VIP Seat, recently noted, “[P]eople have loved to hate on Wheels Up over the last couple years.”

Bastian says, “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.”

Before Bastian can finish, Mattson jumps in. He wants to make it clear; he wanted the job!

Mattson says, “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.”

He recalls, “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 had exposure to the Part 135 aviation space through my investment some years prior to that in Tropic Ocean Airways.”

Like many in the industry, there is a genuine passion for airplanes and the people who make them fly. “Since my time in the space. I’ve always loved aviation,” Mattson says, continuing, “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, we 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.”

Mattson says, “Delta had become even more committed to further 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.”

In fact, for Mattson, the timing was perhaps a bit awkward. “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.’”

While keyboard pundits saw the Titanic, Mattson saw the opportunity. “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.”

Part of Mattson’s glass half-full view is his Delta connection. “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.”

Worst to First
“Do a great job with what you have” – Delta Air Lines CEO Ed Bastian giving career advice on the ‘This Is Working’ podcast.

Like Bastian, Mattson was all-in. In October 2023, he resigned from the Delta board. Mattson’s coming out party was a few weeks later during the industry’s annual convention held in Las Vegas. “I believe we can do this, that we are going to become the best-operated, best-run private aviation company around,” he said.

“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,” he added.

There’s no doubt Wheels Up was becoming focused. In July 2023, it announced it was licensing Avianis to Portside, exiting plans to become the Airbnb of private jets. In August, just before announcing the Delta-led rescue, it announced a deal to sell its private jet management business to Airshare. The deal closed in September, meaning the future Wheels Up fleet would be airplanes it owned or leased. It would no longer have to manage the 100-plus private jet owners who, ultimately, control when and how their airplanes can be used on the charter market. In January, it would spin out its aircraft brokerage unit to the principals who started it, at the same time engaging them to gradually sell down some of its fleet.

Much of the plan was the one Smith unveiled in May 2023, the day Dichter stepped down. Wheels Up is focusing its guaranteed rate programs on the denser population of East Texas and east of the Mississippi, plus key areas in the West. Wheels Up is content with letting other providers offer guaranteed rates between North Dakota and Oklahoma. It is using the Delta corporate sales network to get more business flyers and even out the mix of leisure flyers. It leverages Air Partner with its brokers, akin to luxury travel advisors, and caters to fliers who want something more than the rigid and rules-based fractional and jet card programs typically offer.

· Oct. 20, 2023 – In his first interview, Mattson says, “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.” Under Holtz, Mattson says Wheels Up had already cut cancelations by 50%. Instead of the private aviation supermarket, Mattson says Wheels Up will tap its Air Partner brokerage to provide more flexible solutions and attract more business travel customers to balance its 80/20 leisure split.

· Nov. 9, 2023 – Attempting to show its operational recovery, Wheels Up posted an 88% on-time performance and a 98% completion rate in Q3.

· Oct. 31, 2023 – Wheels Up announces a relaunch of its corporate sales memberships as part of its efforts to target Delta’s 40,000 corporate travel accounts.

· Jan. 2024 – Charter/Fractional drops 4.6% from its 2023 all-time to its second-best year ever with 2.81 million hours in 2022, per ARGUS Traqpak.

· Jan. 9, 2024 – Wheels Up spins out its preowned aircraft sales unit to management

· Jan. 12, 2024 – Delta Air Lines reports 2023 operating revenues of $54.7 and adjusted operating income of $6.3 billion and GAAP operating income of $5.5 billion.

· Feb. 17, 2024 – Wheels Up says it has moved HQ to Atlanta.

· Mar. 7, 2024 – With a reduced PSA, Wheels Up revenues drop from $1.58 billion in 2022 to $1.25 billion in 2023. Net loss declines from $555.5 million to $487.4 million, and Adjusted EBITDA loss drops to $145.9 million from $185.3 million.

· Apr. 12, 2024 – Bastian, speaking with Mattson during a members’ event at The Masters, says, “Delta is leaning in operationally, commercially, financially…No airline has ever had a private experience at scale, and this is what we’re building at Wheels Up.”

· Jun. 25, 2024 – Wheels Up lays off around 11% of pilots

· Aug. 8, 2024 – Mattson says despite continued Q2 losses, “The trend lines are all pointing in the right direction and meaningfully moving quarter over quarter and year over year.” He says the company had 31 days in the quarter without any cancellations.

· Aug. 21, 2024 – Wheels Up announces the departure of Smith, who moves to the CFO spot at a division of CVS.

Some naysayers insist that Delta is simply planning to turn Wheels Up into a pure broker. Others speculate its Air Partner brokerage would also be sold off. Some said Delta was trying to make a multi-year exit, winding things down. When I asked Mattson about that speculation in June, he replied, “Thoughtful companies don’t spend a quarter of a billion dollars to buy some time to wind things down and upset their customers by going out to them, attracting them (to Wheels Up and private aviation).”

What the pundits also miss is the emphasis on brand. Outside of NetJets, Flexjet, and VistaJet, few private jet flight provider companies have widescale consumer awareness. Private aviation is both a tough business and a relatively small business. It’s the definition of a long tail industry. Based on flight hours, the 10th-largest charter/fractional operator has about 30 airplanes, and only a handful have more than 100 for-hire aircraft. NetJets, with its management arm, has around 800, Flexjet is coming up on 300. Their target customers – HNWs and corporations are both hard and expensive to reach via media. Most providers rely heavily on referrals from existing customers for most of their new customers. While the long tail may have well-run and profitable companies (although being private, it’s not really known), they don’t have much brand awareness.

Another place the doubters are behind is that Wheels Up is no longer a basket case when it comes to operations. What they missed is Holtz has been building a reliable airline one step at a time. Mattson has published on-time performance and completion rates since its Q4 2023 earnings, challenging competitors to follow suit. In the most recent survey of Private Jet Card Comparisons subscribers, conducted between mid-July and mid-September, asking about their experience during the prior year, the percentage of Wheels Up members who rated it Excellent or Very Good increased by nearly 50%. Wheels Up was now at 72.3%, just one point below the industry average. If you throw in the 15.4% of Wheels Up members who rated their satisfaction level as Average, then they are at 87.7%, slightly more than a point better than the industry. What’s more, of its members who are considering leaving, only 15.2% cited declining customer service, down from 50.0% a year ago. Flight delays, changes, and cancelations as a reason to leave dropped from 48.4% to 24.2%. Poor communication when something goes wrong went from 30.2% to 18.7%.

Keep Climbing
“The secret to a great operation is a million little steps.” – Wheels Up COO Dave Holtz

For every initiative Wheels Up rolls out, the haters see a mostly empty glass. The idea of tapping Delta’s corporate accounts for their private air needs wasn’t going to work. The people who buy private aviation are different than the travel managers Delta’s sales team calls on. Bastian says, “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. 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.”

When I ask Bastian if he meant he was personally making sales calls, Mattson responds, “He’s my chief sales officer,” with Bastian continuing, “I’m selling a lot. I’ve got my name on this for the last five years.” Mattson adds, “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.” According to Mattson, joint Delta accounts represented the highest mix of overall block sales in September.

That’s not the only place the partnership has driven tangible benefits. Mattson says, “Delta has a big group charter business. We have a big group charter business. We’re connecting there.” Smith tells me one surprise was that Delta gets more requests for group charters, sports teams, corporate shuttles, incentive groups, than it can handle simply because of its brand. Those leads now go to Wheels Up and Air Partner.

Beyond that is cargo charters, in some cases for Delta. Mattson says, “Delta has cargo needs, particularly around time-sensitive AOG (aircraft on the ground – airplanes grounded away from the base by a mechanical) and Tech Ops and engine movements and such that we do on a regular basis (through Air Partner’s cargo charter).”

There’s more low-hanging fruit, apparently. Delta EVP & President International Alain Bellemare sits on the Wheels Up board. He and Mattson, a former board member of Air France/KLM, are on the hunt for international opportunities. “Air Partner and our global charter footprint connects outside the U.S with Delta’s global network and not just Delta’s global network, but you start thinking about Delta’s JV partners, you start thinking about Air France, KLM, Virgin Atlantic, AeroMexico, LATAM, et cetera. There’s lots of expansion use cases here.”

Then there are millions of folks who fly with the big airline every year. “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,” says Mattson. Expect to see digital integration of Wheels Up onto the Delta app in the future, both say.

As to winding down the fleet, well, that doesn’t seem to be happening. Last month, in his second NBAA, Mattson held a press conference to announce Wheels Up’s fleet renewal program, something he had teased in the Q2 earnings announcement. He was buying GrandView Aviation’s fleet of 17 Embraer Phenom 300s to replace the aging Hawkers and Citation light and midsize aircraft. Over the next three years, Wheels Up will replace its Citation Xs midsize jets with roomier Bombardier Challenger 300/350s, which feature a stand-up cabin. While not new aircraft, all will be refurbished, and upgrades will be made to Gogo’s next generation of high-speed streaming.

The Phenoms and Challengers are the best-selling aircraft in their segments, and the Phenoms will cover both the light and midsize segment. He is also keeping the King Air turboprops, so the net result is three fleet types, down from five, something that means less money on inventory parts and smoother operations, particularly compared to the older fleets. Contrary to the pundits, when the renewal is completed, fleet size won’t be materially different. It’s currently around 150.

Sep. 23, 2024 – Delta Air Lines and other investors agree to a one-year lockup extension for their investments.
Oct. 22, 2024 – Wheels Up announces a deal to acquire Phenom 300 charter operator GrandView Aviation and modernize its fleet with $332 million in new financing from Bank of America.

On the finances side, Delta and its investing partners also agreed to an additional one-year lock and with Delta’s backing, Wheels Up secured $332 of financial support from Bank of America, which is being used to acquire new aircraft and bolster its liquidity.

Hard Landing
“The aviation business, you’re either all in or you’re not.” – Ed Bastian

Bastian is clear that this is a multi-year, long-term commitment. However, the airline business is difficult, as he knows first-hand. Terrorist attacks, financial meltdowns, wars, spiking fuel prices, labor conflicts, and various combinations can send the industry from profits to losses overnight.

For every turnaround, such as Gordon Bethune’s at Continental Airlines, which he details in From Worst To First, there efforts that fall short. Robert Gandt’s Skygods tells the story of how Pan Am’s were thwarted, first by overpaying to acquire National Airlines and later from the fallout of the Lockerbie bombing. In Hard Landing and Rapid Descent, the authors chronicle how TWA found a brief recovery under Carl Icahn before turning back into the red, while Frank Borman was able to get Eastern back to cruising altitude only to see its leisure-heavy route network savaged by post-deregulation discount carriers.

Fighting fires is dangerous work. Running into burning buildings can be fatal. Will Wheels Up get to Adjusted EBITDA profits for 2025? The company still expects to be in range to hit its goal of positive EBITDA by year’s end. Revenues are down significantly, but Mattson says they have stabilized. Will Wheels Up get to the real profits Bastian told the troops at the Wheels Up town hall is necessary? Time will tell. However, for the moment, there’s no argument Ed Bastian saved Wheels Up.

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Publish date : 2024-11-12 03:29:00

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