Delta Air Lines and other investors invested $500 million into private jet company Wheels Up to save it from bankruptcy. The investment comprises of $400 million long-term loan from Knighthead Capital Management and Certares Management and a $100 million liquidity facility from Delta Airlines.
Wheels Up experienced severe losses, plunging shares, and was on the verge of bankruptcy when it secured a bailout from investors. Despite increased revenue and memberships, the company reported losses of $555 million last year and had its founder and CEO, Kenny Dichter, step down in May after the company saw a Net loss of $101 million in its first-quarter report for 2023. It underwent a series of restructuring changes, including job cuts and management changes. It had issued a stock market warning notifying investors of its inability to sustain ongoing operations despite a $15 million short-term funding from Delta Airlines, who reported profits for the second quarter of 2023.
This investment will prevent potential bankruptcy and give the company financial stability at a cost. The company will cede 95% ownership to Delta Airlines and the other investors as part of the agreement. In addition, there will be changes in its management structure. Delta Airlines CFO, Dan Janki, will replace Ravi Thakran as Chairman of Wheels UP, while Todd Smith will remain the CFO and Interim CEO.
Delta Airlines CEO, Ed Bastian, commented on the partnership in a statement saying;
“The partnership will create new opportunities for Wheels Up to drive strategic, operational, and financial improvements for its customers in the months and years ahead. Delta’s unmatched expertise in premium travel, customer loyalty, corporate sales, operational reliability and aircraft maintenance, combined with Certares’ and Knighthead’s experience and global reach, are expected to speed Wheels Up on its path to profitability.”
Founder and Senior Managing Director at Certares, Greg O’Hara, added that;
“This strategic partnership with Wheels Up is a natural extension of our focus and experience in travel, tourism and hospitality. It is also a natural extension of our longtime partnership with Delta across many of our portfolio companies. We’re looking forward to joining Delta, Knighthead and others in driving the company’s ongoing transformation as it elevates private aviation as an industry leader.”
Interim CEO, Todd Smith, had this to say about the new investment;
“Over the past few months, we have been intensely focused on taking clear steps to improve our product offering and our operational delivery. Those actions are already showing results, and we look forward to continuing and accelerating that progress with the support of our new partners. Our continued close work with the Delta team will enable us to further integrate our digital experiences, member benefits and our operations.”
Although the new partnership will provide Wheels Up with funding and financial stability, the company has more work to do to return to a profitable status.
Delta Airlines and Wheels UP
Delta Airlines has been closely connected to Wheels Up since its establishment in 2013. Delta Airlines became the largest shareholder in Wheels Up after it sold units of its Delta Private Jets to Wheels Up in 2013. Before the announcement, Delta Airlines held 20% stakes in the company and had an exclusive agreement allowing Wheels Up members to receive Delta Airlines benefits.
Wheels Up is a New York-based private jet company founded by Kenny Dichter to “democratize” private jets. The company, which charters planes by the hour, operates a membership model with over 11,000 active members. Wheels Up recently acquired five different charter operators, Delta’s Private Jets, Mountain Aviation, Alante Air Charter, Gama Aviation Signature, and TMC Jets, each running under separate government certificates. Wheels Up currently holds the position of the second-largest provider of on-demand aviation.
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