Wheels Up Cuts Losses and Smoothes Operations in 2Q

Wheels Up has reported progress in bolstering its balance sheet during the second quarter, further reducing losses as its new leadership team strives to reverse the private flight provider’s fortunes under a new business model. Releasing second-quarter results, CEO George Mattson said the company has significantly improved operational performance while boosting flight transaction values and exploiting its close alliance with its main shareholder Delta Air Lines as it sticks to its goal of achieving profitability by year-end.

Revenues for the three months through June 30 decreased by 41% compared with the same period in 2023 to $196.3 million. This was mainly due to its sale of the aircraft sales and management businesses to Airshare, which CFO Todd Smith said had generated more than $200 million in revenues but didn’t contribute to Wheels Up’s profitability. Overall revenues in the first half of 2024 were $393.4 million, which was 43% down on the $686.9 million recorded in the same period last year.

The net loss at Wheels Up was reduced by 40% during the second quarter to $97 million, taking the net loss for the first half of 2024 down by 26% to $194.4 million, compared with the same periods in 2023. The group’s adjusted EBITDA loss declined by 7% to $37.4 million for the second quarter and by 3% for the first six months of the year to $86.6 million.

Reflecting recent initiatives to reduce costs, including the closure of some maintenance bases, operating cash expenditure for the second quarter totaled $27 million, which was 63% less than the first quarter and 87% down on the same period in 2023. Wheels Up ended the quarter with total liquidity plus reserve deposits of $261 million, which includes cash and cash equivalents, as well as an unused revolving credit facility from Delta Air Lines and other investors and a $20 million reserve deposit.

The principal balance for the secured aircraft finance facility for the Wheels Up fleet stood at $176 million at the end of the second quarter. Smith said this is 35% down on the original $270 million loan, with a $16 million reduction over the last three months as the company pays down the associated debt for aircraft it sells.

“Our levels of leverage will be supported by higher levels of EBITDA, and the journey [to improve] cash flow is what will support our capital structure,” Mattson told BJT. “The level of debt is not out of line with the size of our company and our revenue base; we just need to get the EBITDA where it needs to go.”

The figures released showed Wheels Up to have boosted its adjusted contribution margin—the measure of revenues covering fixed costs—to 7.8% in the second quarter. This was up from 1% in the previous quarter and 5.4% 12 months ago.

Charter Flights Increase

The company said it has grown the pay-as-you-fly charter side of its business by 33% over the first quarter and 16% year over year to the extent that these flights now account for almost two-thirds of the total flight transaction value (FTV). The FTV for the company’s membership-based Private Flight offering increased by 15%, which the company said reflected increased usage of large aircraft.

In June, it simplified its product offerings to a choice between Wheels Up Membership, in which members gain assured access to aircraft on payment of an annual fee, and upfront-funded flight hour rates. For those who prefer a pay-as-you-go model, there is Wheels Up Charter allowing ad hoc bookings. Both plans give opportunities to earn rewards with Delta, including Diamond Medallion Status with its loyalty program.

During the second quarter, the number of active Wheels Up members decreased by 29% to 8,268 compared with the same period last year, which the company said was mainly due to the restructuring of member programs around regions of the U.S. and a focus on “profitable flying.” The number of what the company calls active users dipped by 20% to 9,999.

Mattson said his team has made progress in restarting commercial momentum, as reflected in the growth in prepaid block sales of $145 million during the second quarter, which was 27% more than the first quarter and a 50% year-over-year increase. He was appointed CEO in mid-September last year, taking over from Smith, who had served as interim CEO following the departure of company founder Kenny Dichter last May.

“Late last year, we were in a very tough spot as we were restarting the commercial engine, which takes time to start,” Mattson told AIN. “We’ve stabilized revenues after several quarters of sequential decline, which we see as a sign of returning to growth. We’re getting closer and closer to our target of being profitable, and the growth that we see in the future is profitable growth, not just revenue growth that decreases losses, which was part of the mindset of where the company was in the past.”

More Jets, Fewer Turboprops Expected

While taking encouragement from the improved financial metrics, Mattson told BJT that progress made in strengthening operational performance is the bedrock for turning the company around. Indicating that Delta is in it for the long haul in its strategic support for the company, he said that the leadership team is focused on fleet modernization, with action anticipated later this year that is expected to place a higher emphasis on jets than turboprop aircraft.

Wheels Up has now combined its Textron King Air 350i turboprop and Citation Excel/XLS jet fleets under a single FAA air operator certificate (AOC) that already includes the Hawker 400XP. By reducing the number of AOCs, it has achieved cost savings resulting from maintenance, scheduling, and flight crew training. It is now transitioning its larger Citation Xs to the same certificate.

The company's owned and leased fleet currently includes 164 aircraft. The breakdown by type is as follows: 56 King Airs, 40 Citation Xs, 31 Hawker 400XPs, 18 Citation Excels, 18 Citation CJ3s, and one Gulfstream IV-SP.

Wheels Up’s second-quarter completion rate—the percentage of scheduled flights operated and completed, excluding customer-initiated cancellations—was 99%. On-time performance was 87%, as defined by flights that departed within 60 minutes, inclusive of delays resulting from air traffic control, weather and maintenance issues, and customer-related factors. In the same period, the company also achieved 31 "Brand Days," which is when there are no flight cancellations across its controlled fleet.

“We want to be operationally excellent and the best-run private aviation operation in the business,” Mattson said. “You cannot have a strong business if you don’t have a strong operation. We will leverage and follow the Delta playbook, because Delta has been on this journey for the past 12 years, including when I was on the board.”

Acknowledging that in recent years, Wheels Up has not always fulfilled its core value proposition of “giving the customer back the time they have paid quite dearly for,” Mattson said the company is now meeting and exceeding its targets for operational performance. “Along with other business aviation companies, we had operational challenges as we grew quickly through Covid and perception lags reality, and we now want to catch people up to the reality of today,” he stated.

More Transparency, More Value

With the exception of Volato, Wheels Up believes it is the only private aviation sector that publishes its operational metrics on a quarterly basis as part of its commitment to being transparent with its members and customers. In late July, the company introduced a feature on its app that allows travelers to see real-time dynamic pricing for flights out of specific locations to exploit opportunities to save money with some flexibility over departure times.

“Being profitable is all about utility and efficiency, and we’ve got much better at scheduling and thinking about pricing more dynamically,” Mattson commented. “This drives higher utilization, which has largely not yet made its way into private aviation. We’re driving demand into slots where there is more availability and we’re also doing work on modernizing our fleet to attract more customers.”

Mattson identified the convergence of the combined Wheels Up and Delta service offerings as being key to the company’s future success. In his view, this provides a still-to-be-fully-exploited platform for attracting travelers who have never previously flown privately, by offering flexible solutions spanning scheduled flights and on-demand lift. “Private aviation can seem confusing and inaccessible, and the brand halo of Delta helps,” he said.

The network extends beyond North America through Delta’s alliances with carriers such as Air France and Virgin Atlantic, and also through the UK-based charter broker Air Partner that Wheels Up acquired a few years ago. Air Partner can arrange flights through approved third-party operators almost anywhere worldwide through its membership-based JoinUp program, or the ad hoc charter FlyUp package.