Wheels Up Wrestles With Supply Shortages

The company recorded a nearly $60 million loss despite a 55 percent gain in revenue in the third quarter of 2021.

Wheels Up wrestled with shortages of flight crews and airplanes during a period of “unprecedented demand” for the private aviation membership company in the third quarter, resulting in a $59.45 million loss despite double-digit gains in revenue.

That’s according to the New York-based company’s recently released third-quarter earnings, in which Wheels Up reported a 55 percent gain in revenue, to $301.9 million, compared with the same period last year. Year-to-date, Wheels Up’s loss widened to $120.6 million on 75 percent higher revenue of $849.2 million.

“With unprecedented demand comes supply challenges that are also unprecedented,” Wheels Up CEO Kenny Dichter told analysts during an earnings call. “These supply challenges were significantly exacerbated during the third quarter, which impacted contribution margin in our profitability.”

Dichter said “the biggest gating factor” currently for Wheels Up is the supply of pilots to meet that demand. “The end result was that we could not fully crew our first-party fleet during the third quarter. This reduced the utility of our fleet versus our prior quarter.” A related challenge was the availability of flight crews for partner companies that provide Wheels Up with supplemental lift, he added. “This resulted in less third-party aircraft available to us and increased costs obtaining that supplemental lift.”

Still, Dichter told analysts, he believes Wheels Up can overcome these issues as it focuses on bolstering the company’s technology to improve flight operations and aircraft utilization. “But it will take some time and patience to address these supply constraints and increased costs,” he added.

Specifically, the company is providing “equity grants” to pilots that will allow them “to share in the success of the company,” Dichter said. It also is investing in its travel management program for pilots for such things as hotels, ground transportation, and food. “These may sound like simple things but during and after a long day of flying they are incredibly important for quality of life,” he said. “Our pilots represent some of the best-trained, dynamic individuals in the industry and are frontline with our customers. We want Wheels Up to be their employer of choice.” Additionally, Dichter noted that the company is investing in maintenance technicians and facilities to return its aircraft back to service more quickly.

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To compensate for its increased expenses—including “spending more to secure and lock up third-party aircraft supply”—Wheels Up is requiring more advance notice of travel and “raising pricing and requiring larger block commitments from members for peak-day guarantees.” Members that have already locked in or will lock in larger block commitments prior to December 1 will not be affected by the higher pricing.

Wheels Up is also increasing pricing for each individual trip by 8 percent on use of its King Air turboprops and 13 percent on light jets but leaving cap rates as is on midsize and super-midsize jets. Despite the pricing increases, Dichter added, “We’ve already seen our competitors move pricing more drastically than we are.”