Wheels Up flies for now, but private-jet rivals see opportunity

Wheels Up Experience

16/08/2023 19:10

By Allison Lampert
       Aug 16 (Reuters) - Loss-making private jet firm Wheels
Up Experience  UP.N  nabbed a key $500 million lifeline but
still faces turnaround challenges, as demand for private travel
softens in the wake of the COVID-19 pandemic and rival operators
lure some of their customers.  
    Wheels Up avoided a possible bankruptcy when it secured
backing from investors on Tuesday, including U.S. carrier Delta
Air Lines  DAL.N . Shares rose 11% on Wednesday in midday
trading.
    But the company still has work to do to become profitable in
a more difficult environment, said business aviation consultant
Brian Foley. Two operators have closed down since May in the
face of diminished traffic and higher labor costs could force
some private-jet operators out of business. 
        "There will be some more casualties," Foley said.
    Rivals, meanwhile, say they have been picking up some of the
company's customers.
        "I don't wish for turmoil in the market at all, but I'm
an opportunist," said Jim Segrave, CEO of private operator
FlyExclusive, who said his company has attracted customers from
Wheels Up, the third-largest private-flight operator last year.
    Wheels Up said it is pleased with the response from
customers. "We are in the middle of year-long meaningful
improvement in our operational performance and service levels,"
the company said in a statement. 
    Wheels Up, which charters planes by the hour, went public in
2021 through a special purpose acquisition company (SPAC) with
the goal of appealing to a broader flying base as an "Uber of
the sky."
    The state of private traffic and the preowned plane market
are both closely watched by investors as they affect demand for
corporate jets from companies like General Dynamics's  GD.N 
Gulfstream and Canada's Bombardier  BBDb.TO .    
    While private flying remains above 2019 levels, traffic has
slowed since the pandemic, when wealthy passengers sought to
avoid crowded commercial airports. Charter traffic from the top
10 U.S. private airports declined 17% on an annual basis for the
first half of 2023, research firm Argus International said.
        "The demand we saw at the end of 2021 and 2022 would
have been difficult to sustain," said Travis Kuhn, a senior vice
president at Argus.
        A one-way, last-minute flight from New York to Miami on
a light business jet which seats six to eight passengers would
cost around $20,000, compared with a first class ticket at
roughly $1,100 per passenger, according to Justin Crabbe, chief
executive at private-flight platform Jettly. 
        
    Higher salaries
     for North American airline pilots also are putting pressure
on private aviation to raise wages.
        "It will challenge some of the players that lack
experience," said Andrew Collins, co-CEO of private aviation
operator FlexJet. 
        However, experienced rivals with deeper pockets are
expected to still attract flyers. 
    Segrave, of North Carolina-based FlyExclusive, said in an
interview he sees opportunity to gain market share in a softer
market as it prepares to go public through a SPAC. The company,
which provided third-party flying service to Wheels Up, faces a
lawsuit from Wheels Up over a contract dispute.    
    Jamie Walker, chairman of U.S. private jet operator Jet
Linx, said he sees opportunity for both organic growth and
acquisitions due to the softening marketplace. The company has
attracted new customers due to Wheels Up's recent struggles. 
    "We have received numerous inquiries over the last several
months from Wheels Up clients who are unsettled with the
financial health of the company," Walker said. "But more
importantly, we have successfully converted many of them."

 (Reporting By Allison Lampert in Montreal, editing by Ben
Klayman and Andy Sullivan)
 ((Allison.Lampert@thomsonreuters.com; 514-796-4212; Reuters
Messaging: allison.lampert.reuters.com@reuters.net))