Aviation upstart Wheels Up set out to reshape the private jet sector. But after more than $1 billion in losses the past three years, a management shake up and a series of rescue investments that kept the New York company afloat, Wheels Up is rebooting itself in a new home near Atlanta.
Inside a building near DeKalb-Peachtree Airport, Wheels Up leaders are crafting a new strategy, one that relies on hundreds of millions of dollars from headlining investors, such as Delta Air Lines, a key business partner.
Consolidating far-flung operations in Atlanta and diving deeper into its partnership with Delta are central components. Wheels Up offers memberships for well-heeled travelers to book private charter flights, but it also provides private jet flights to the Atlanta-based airline’s highest paying corporate customers.
Delta became a partner of Wheels Up through a spinoff of the airline’s private jet subsidiary, Delta Private Jets, in a deal announced in 2019. Delta also took on an equity stake in Wheels Up, which amounted to about 24% of the company by December 2020.
But Wheels Up ran into severe financial struggles, leading to the resignation in May of its CEO and founder Kenny Dichter.
Wheels Up lost $197 million in 2021, the year it went public, then posted $555 million in losses in 2022, and lost another $406 million in the first three quarters of 2023. Memberships dropped as customers lost confidence in the company and stood to lose their deposits.
The company in August warned that if it could not get additional funding soon, it could end up in bankruptcy.
Wheels Up CEO George Mattson, a longtime Delta board member, took the helm of the company in October and is based in Atlanta. He’s optimistic in spite of the challenges Wheels Up has faced.
“We’ve seen a real bounce back in activity,” Mattson said. “We expect that that’s going to accelerate.”
Credit: NATRICE MILLER
Credit: NATRICE MILLER
When the COVID-19 pandemic hit, demand for private jet travel spiked as people who could afford to sought to avoid crowded airports and airplanes. That boom in business, Mattson said, served to exacerbate Wheels Up’s challenges.
With the surge in demand, Wheels Up had to turn to other private jet operators to serve customers that it had granted guarantees to fly as part of their memberships, if they booked 48 hours in advance, said Doug Gollan, editor of Private Jet Card Comparisons, a guide to jet card membership programs.
The other private jet operators that Wheels Up had to rely on “were just charging them what the market would bear,” Gollan said, causing Wheels Up’s expenses to go through the roof. “Their stock price was getting hammered because the losses were increasing.”
Delta agreed to co-lead a $500 million round of funding with travel investment firm Certares, which owns American Express Global Business Travel and a significant share of Hertz and other travel companies. Other partners include turnaround investment firm Knighthead, along with Cox Enterprises, which owns The Atlanta Journal-Constitution. The investment was finalized in September.
As part of the deal, the lenders received stock giving them approximately 95% ownership of the company. In November, Wheels Up announced another loan of $40 million from Kore Capital and Whitebox Advisors.
Delta’s decision to put so much money into struggling Wheels Up is a turnabout, after the decision to spin off its private jet business.
After Wheels Up ran into its troubles, “If Delta hadn’t stepped in, they would have very likely declared bankruptcy,” Gollan said.
That would also be a problem for Delta, which was already a part-owner of Wheels Up. The private jet business is also part of Delta’s strategy to serve high-end customers.
Gollan said Delta has tried to distinguish itself from rivals American and United with more premium experiences.
“For us to be able to add that to our stack as the premium opportunity within the Delta experience, no one’s ever been able to do that. We’ve been attempting to pull that off,” said Delta CEO Ed Bastian during a talk at The Wings Club in New York last year.
Headquarters move
Wheels Up’s new operations center houses about 300 workers near DeKalb-Peachtree Airport, a key airport for its customers — and about 20 miles from Delta’s headquarters.
Shifting the headquarters from New York is “gonna take some time,” Mattson said.
The operations center is modeled after Delta’s massive Operations & Customer Center at its headquarters near Hartsfield-Jackson International Airport, and is led by Dave Holtz, who was a key operations control manager for Delta.
With a centralized operations center, Wheels Up has been working to consolidate the six FAA operating certificates it had accumulated through acquisitions.
Having separate operating certificates means it’s not as easy to swap out one plane for another, because the crew may not be authorized to fly the replacement plane. That makes it much more complicated to manage operations.
Wheels Up aims to get to a single operating certificate in early 2024. In the process, it will likely refine its fleet and consider larger aircraft to cater to corporate customers.
And, the company is focusing more on heavily-populated areas on the Eastern and Western seaboards for more profitability, Mattson said. After suffering losses from guaranteed availability and pricing, Wheels Up will stop offering those guarantees in new agreements with customers in the middle of the country where it’s harder to make a profit, he said.
Private-commercial strategy
Wheels Up already allows its private jet members to easily use their membership funds for Delta flights, and the deeper Delta partnership is allowing that to expand to corporate customers as well.
“This week, I might be a business person who needs to go to Detroit from Atlanta,” a route with multiple flights a day on Delta, Mattson said. “I’ll go Delta commercial, no problem. Next week, maybe I’m going with a set of colleagues to try and see two or three facilities that are hard to get to. I’ll take the Wheels Up flight.”
A family vacation may merit a private jet flight on Wheels Up, while a business trip could be a Delta flight to London, he said.
“This is really resonating with corporations,” Mattson said. “Whether you’re a multinational corporation that owns their own fleet and has a lot of resources, or you’re a smaller business that needs to access private aviation occasionally, that flexibility is really important.”
Mattson thinks for Delta, that’s an opportunity.
“It might be just getting a leg up and what may become, you know, the future business model 10 years from now,” he said.
It’s been tried before. American Airlines pulled out of a similar concept in the 1990s after a few years.
“So the naysayers say, ‘Oh, it’s been done before. It didn’t work,’” Gollan said.
“Time will tell,” he said.
