Wheels Up Flies South To Regain Altitude With New CEO

Wheels Up is again turning to Delta Air Lines for C-suite leadership. After appointing the Atlanta-based airline’s CFO Dan Janki as Chairman last month, the New York-based private jet flight provider is tapping Delta Board Member George Mattson as CEO.

He replaces Interim CEO Todd Smith, who returns to his CFO role. Smith moved to the corner office after Founder, Chairman, and CEO Kenny Dichter stepped aside in May amid mounting losses.

Mattson is a member of Delta’s Board of Directors since 2012. He previously served as a partner and co-head of the Global Industrials Group in Investment Banking at Goldman Sachs & Co. from 2002 to 2012, during which time his responsibilities included oversight of the Transportation and Airline practices. Since 2014, he has been the lead investor and Chairman of Tropic Ocean Airways, the nation’s second-largest operator of seaplanes. Tropic Ocean Airways is a Wheels Up partner.

This morning’s news comes as Wheels Up is working to finalize a $500 million investment led by Delta. In August, Wheels Up announced a non-binding agreement which is expected to include funds contributed by Delta, CK Opportunities Fund I, LP, which is co-managed by affiliates of Certares Management LLC and Knighthead Capital Management LLC, and certain other lenders. The transaction is subject to completing definitive documentation, as well as customary closing conditions and other approvals.

The deal would give Delta and financial partners a 95% stake in the 2013 startup, which has struggled to merge a half-dozen acquisitions and failure to hit profit targets since its July 2021 IPO despite exceeding sales goals.

George is an exceptional business leader whose background will be instrumental to the continued success of Wheels Up,” said Delta CEO Ed Bastian. “With new leadership in place, Wheels Up is well-positioned to drive strategic, operational and financial improvements for its customers and stakeholders in the months and years ahead.”

“I look forward to working with George as he brings his expertise and leadership to Wheels Up,” said Janki. “I would also like to thank interim CEO Todd Smith for his leadership through this period of transition at Wheels Up. The changes made during his tenure are expected to stabilize the business and will help drive future profitability and an elevated experience for our members. Todd will continue his work as Wheels Up CFO.”

“In 10 years, Wheels Up has grown from a startup into a global leader in private aviation, with a strong consumer brand and loyal member community,” Mattson said. “I look forward to leading the Wheels Up team, with the operational, commercial, strategic and financial support of Delta and our other new investors. Delivering best-in-class operating performance and exceptional customer experiences, consistently and profitably, will attract more members to our community as we begin the next chapter of the Wheels Up story.”

During an interview yesterday, Mattson indicated that Wheels Up would push to the back burner its ambitious plans to create an Airbnb, Expedia-like digital marketplace for private jet charter flights. Instead, it will focus on improving operations, reliability and becoming profitable.

“Broader initiatives, the marketplace, we’re going to continue to look at and evaluate and save for another day. Our near-term focus is important areas that underpin our ability to execute in our operation and for our customers. I really want to kind of narrow the focus initially to make sure we nail that before you take on broader and more ambitious goals,” said Mattson.

He continued, “You could argue that (Wheels Up was) victims of their own success and outran their ability to manage it sufficiently, which is obviously, absolutely critical in any business, but especially critical in the airline business. We’re going to build off of that success from the past, take everything we can from it, and take it forward into a new chapter, which is really going to be underpinned by sustainability of performance, sustainability financially, and operational excellence, which has to underpin any consistently excellent customer experience. And those two things are inextricably linked, and we are never going to be losing sight of that. That’s going to earn us the right to grow again and to be even more successful in the future.”

Mattson said Wheels Up will be tapping the Delta playbook.

“Delta wasn’t always viewed as the most reliable airline. It was a journey that started after the Delta-Northwest merger and has taken a decade. But if you go back 15 years, the idea of a zero-cancellation day at a mainline airline was unheard of. Never happened. And now (Delta has) 250 of them a year or so. Things that haven’t been done or weren’t thought possible, you know, can happen. And that’s the kind of mindset and attitude we want to take to deliver a new reality for operational excellence and performance at Wheels Up,” Mattson added.

Earlier this year, Wheels Up opened a new centralized operations center in Atlanta.

Covering a variety of subjects, he said that the previously announced agreement to sell the Wheels Up aircraft management business to Airshare is on track to close by the end of this quarter or the beginning of Q4.

The incoming CEO dismissed concerns that the pending investment won’t be enough. “The $500 million is sufficient to execute the plan. There are lots of opportunities to drive efficiencies, cost synergies, and revenue that are part of the future that weren’t part of the past until we were able to align with Delta and our other partners through this transaction much more closely,” he said.

Through the first half of 2023, Wheels Up ranked as the fourth-largest North American private jet operator based on charter and fractional flight hours. It has over 11,000 members.

During Q2 revenue decreased 21% to $335 million year-over-year from $425 million. Net loss increased $68 million year-over-year to $161 million, including a $70 million non-cash goodwill impairment charge. Adjusted EBITDA dropped 14% year-over-year from $47 million to $40 million. Cash and Cash Equivalents fell from $363 million to $151 million.

In recent weeks Delta has provided Wheels Up with $60 million of interim financial support. Twice earlier this year it has had to rebut reports of a bankruptcy filing that would have jeopardized monies members pay in advance for future flights. Blocks of flight time typically range from $100,000 to $400,000.

Wheels Up is hoping to generate incremental revenue from business flyers by selling flights to Delta’s corporate accounts via the airline’s sales team. Its current mix is heavily leisure focused, with high fleet utilization on Fridays and Sundays, but extra capacity during the week.

It has moved to cut loss by focusing the areas it offers guaranteed flights at capped hourly rates to regions with higher customer and route density. The strategy is expected to cut the cost of repositioning flights and speed up recovery flights when there are mechanical delays.

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