Wheels Up Experience Inc. Reports Financial Results for the Quarter Ended June 30, 2024

Wheels Up’s Financial Performance: Navigating Challenges and Charting a Path Forward

Wheels Up, a leading provider of on-demand private aviation in the United States, has recently released its financial results for the three and six months ended June 30, 2024. The report highlights the company’s efforts to streamline its operations, optimize its aircraft fleet, and enhance its product offerings to better serve its members and customers.

Overview of Financial Performance

For the three months ended June 30, 2024, Wheels Up reported revenue of $196.3 million, a decrease of 41.4% compared to the same period in 2023. This decline was primarily driven by a 29% decrease in Active Members and a 29% decrease in Live Flight Legs, as the company focused on more profitable flying. The company’s Adjusted Contribution Margin, a non-GAAP metric that measures profitability, improved by 240 basis points during the quarter, indicating that the company’s cost-saving initiatives are starting to bear fruit.

For the six months ended June 30, 2024, Wheels Up reported revenue of $393.4 million, a decrease of 42.7% compared to the same period in 2023. Similar to the quarterly results, the decline was largely attributable to a 27% decrease in Live Flight Legs and a 23.8% decrease in Membership revenue. The company’s Adjusted Contribution Margin improved by 80 basis points during the six-month period, reflecting the positive impact of its operational efficiency initiatives.

Streamlining the Product Portfolio

In June 2024, Wheels Up announced enhancements to its member programs and charter offerings, streamlining its product portfolio into two main offerings: Wheels Up Membership and Wheels Up Charter. This move is intended to simplify the private aviation experience for members and customers, provide attractive benefits for a range of private fliers, and grant them the flexibility to tailor each trip to their specific needs.

The Wheels Up Membership program now offers two primary categories: Individual and UP for Business. The Individual membership, when paired with the purchase of a Prepaid Block, provides members with benefits such as capped hourly rate pricing, greater aircraft availability, and access across cabin classes. The UP for Business membership caters to small, medium, and custom enterprise solutions, offering tailored options to fit the needs of business fliers.

The Wheels Up Charter offering, on the other hand, allows members and non-member customers to book charter trips with no upfront costs, leveraging the company’s global network of trusted partners to provide a wide range of charter solutions.

Enhancing the Delta Partnership

Wheels Up’s partnership with Delta Air Lines continues to be a key strategic advantage. In June 2024, the companies announced further enhancements to their collaboration, including the ability for Wheels Up members to earn Delta Diamond Medallion® Status based on their qualifying Wheels Up spend and use Prepaid Blocks to purchase discounted Delta flights.

Additionally, Wheels Up Charter customers can now earn rewards for each flight, equal to a 2% flight credit for every $50,000 spent on charter flights, and qualify for Delta Diamond Medallion® Status after achieving qualifying flight spend. These benefits are expected to drive increased engagement and loyalty among Wheels Up’s members and charter customers.

Network Optimization and Cost Reduction Initiatives

Wheels Up has taken several steps to optimize its operations and reduce costs, including:

1. Focusing on the Primary Service Area: The company has consolidated its controlled aircraft fleet into specific regions along the east coast, west coast, and travel in between, while continuing to service all regions in North America using its charter solutions. This strategy is expected to improve network density and provide significant cost and operating advantages.

2. Aircraft Fleet Management: Wheels Up has been divesting certain underperforming or underutilized aircraft and plans to continue this process as it pursues its long-term fleet strategy. The company also expects to acquire or lease newer aircraft in the future to replenish its fleet.

3. Maintenance Facility Optimization: Wheels Up announced the opening of a new flagship maintenance facility at Palm Beach International Airport by the end of 2024, which is expected to improve the efficiency of its aircraft maintenance operations and reduce operating costs.

4. Certificate Consolidation: The company continues to progress with the consolidation of its FAA operating certificates, which is intended to simplify its flight operations and harmonize procedures across the entire organization.

5. Additional Cost Reduction Initiatives: Wheels Up has taken various actions to improve operating efficiency and reduce fixed costs, including the opening of its Member Operations Center in Atlanta, Georgia, and strategic reductions in the number of owned and leased aircraft in its fleet.

These initiatives are expected to contribute to the company’s operational excellence and support its future profitable flying.

Financial Position and Liquidity

As of June 30, 2024, Wheels Up had $141.5 million in cash and cash equivalents and $32.1 million in restricted cash. The company’s long-term debt obligations consisted primarily of approximately $176.4 million in Equipment Notes and $421.0 million in Term Loan, including capitalized paid-in-kind interest.

Wheels Up had a working capital deficit of $585.3 million as of June 30, 2024, and net cash used in operating activities was $100.8 million for the six months ended June 30, 2024. The company expects to meet its liquidity needs for the next 12 months through a combination of cash and cash equivalents, cash flows from operations, strategic dispositions of non-core or underutilized assets, and, if needed, borrowings under its $100.0 million Revolving Credit Facility.

Outlook and Key Takeaways

Wheels Up’s financial results for the three and six months ended June 30, 2024 reflect the company’s ongoing efforts to streamline its operations, optimize its aircraft fleet, and enhance its product offerings. The decline in revenue was primarily driven by a focus on more profitable flying, which resulted in a decrease in Active Members and Live Flight Legs.

However, the company’s Adjusted Contribution Margin improvements suggest that its cost-saving initiatives are starting to pay off. The streamlining of its Wheels Up Membership and Wheels Up Charter offerings, along with the continued enhancements to its partnership with Delta, are expected to drive future revenue growth and improve the overall customer experience.

Wheels Up’s liquidity position, while challenging in the short term, is being addressed through a combination of cash management, strategic asset dispositions, and access to its Revolving Credit Facility. The company’s long-term success will depend on its ability to execute its operational efficiency initiatives, maintain a healthy financial position, and continue to innovate and adapt to the evolving private aviation market.

Overall, Wheels Up’s financial report highlights the company’s commitment to navigating the current challenges and charting a path forward that leverages its strengths, optimizes its operations, and delivers value to its members and customers.