Wheels Up Gets Mulligan With Eleventh Hour Funding

As cash burn continued and concerns escalated on Wheels Up’s ability to continue as a going concern, shareholder Delta Air Lines
DAL
and its investing affiliates came to the rescue with up to U.S. $500M in new financing. The non-binding agreement in principal with co-investors Certares Management and Knighthead Capital Managment provides a facility comprised of a $400M term loan and $100M liquidity providing them a 95 percent stake in the replenished company.

Pending closing, that would be great news for Wheels Up, one of the world’s largest private aircraft ride services, giving it a second lease on life and more time to get its house in order. Aggressive route expansion, unprofitable trips, misguided executive performance metrics and expensive company acquisitions all combined to create an untenable financial situation.

This provides a sigh of relief for clients, employees, vendors and other stakeholders as some near-term uncertainty has been removed. Change was already afoot in the form of cost-cutting, route optimization and right-sizing the operation. Leadership has also been regrouped to better address the current state of the company and where it needs to be in the future. How public shareholders, previous investors and acquisitions paid with company stock will fare is still to be seen.

Delta is not a newcomer to the private jet industry with experience previously gained from its Delta Private Jets affiliate. Other airline experiments with business aircraft have not gone as well, including United’s foray with its Avolar division in the early 2000’s with hundreds of new business jets on order before abruptly shuttering. Part of that dissolvement is believed to have been driven by the mainline’s pilots union, a situation Delta can’t ignore with Wheels Up’s hundreds of non-union crew members.

Although there are still concerns ahead regarding finding profitability in a private aircraft charter market on the decline since its pandemic high, Wheels Up has established a terrific brand which differentiates it from most others who typically fly a patchwork of jets unfamiliar to clients. The company is also known within the industry as having hired best-of-breed employees who’d become critical in executing the re-energized vision of its new owners and managment team.

What could have been a gear-up landing for Wheels Up is now a go-around with a new chance to stick the landing.