Wheels Up and Delta – Tough Decisions Ahead |

Wheels Up is a private aviation company that has fallen on difficult financial times. The company, which enables customers to prepurchase business aircraft flights, also has an arrangement with Delta through which those private flight deposits can be turned into Delta tickets. Wheels Up and Delta - Tough Decisions Ahead. Wheels Up was once viewed as the potential Airbnb or Uber of aviation, aiming to make private flying more affordable and easier to book. The company had a high-profile founder and CEO, Kenny Dichter. They produced high-profile marketing campaigns featuring Tom Brady and Serena Williams as brand ambassadors. The company, which operates Beechcraft King Air and Cessna Citation jets, went public in 2021 and traded at $11 per share before falling to about 40 cents today. The business model doesn’t seem to be working as projected. The first quarter of 2023 performance was not good, with year-over-year losses widening by $12 million to a quarterly loss of $101 million after a 2022 annual loss of $555 million. Founder and CEO Kenny Dichter has stepped down, with current CFO Todd Smith becoming interim CEO and Ravi Thakran becoming Executive Chairman of the Board. The company is attempting to eliminate less profitable flying to focus more on the Northeast and active routes. But virtually every analysis points to a potential bankruptcy in the near future. When that happens, the 12,600 customers investing more than $1 billion in prepaid flight cards will likely become junior creditors and lose their investment. Wheels Up charges an $17,500 initiation fee, annual dues of $8,500 for its core program, and hourly costs that vary with aircraft type. Clearly, the fee and dues will likely be lost for customers. But most have balances that could be used to pay the hourly fees for aircraft charters. But there is a twist. Delta Air Lines owns equity in Wheels Up and partners with the company, enabling customers to utilize their Wheels Up credits on Delta flights. Should Wheels Up enter Chapter 11 or, worse, liquidate under Chapter 7, those flight credits would not be available for customers to utilize on Wheels Up. Would customers be allowed to continue to book Delta flights from their accounts? Without available funds in Chapter 11, would Delta need to pick up the cost to keep customers happy? Since Delta would not have been paid for tickets, it is unlikely that airline refund policies would apply, and customers would be forced into the bankruptcy process with Wheels Up to obtain any of their deposits back. We would expect a run on Delta tickets from Wheels Up customers to try and obtain a return on their already deposited funds that, without further Delta investment, could result in default and the need for Chapter 11 bankruptcy protection. Delta is facing a tough decision. Do they support wealthy customers and honor some ticketing with time limits? Should they invest and try to turn around a company in deep financial trouble? Can they emerge unscathed after a marketing partnership that doesn’t meet marketing expectations? Time will tell, but some important decisions remain ahead that could impact the image of Delta with a set of wealthy customers Delta does not want to lose.

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