A partnership consortium spearheaded by Delta Air Lines in collaboration with investment firms Certares and Knighthead has unveiled a preliminary agreement to acquire 95 percent ownership of Wheels Up for a sum of $500 million. This strategic arrangement includes a $400 million term loan and an additional $100 million “liquidity facility” extended to Wheels Up by Delta.
Last week, Delta took steps to provide interim financing of $15 million to Wheels Up. In the proposed arrangement, Todd Smith will continue to serve as the interim CEO of Wheels Up, while Delta’s chief financial officer, Dan Janki, will assume the role of Wheels Up chairman, succeeding Ravi Thakran.
Delta CEO Ed Bastian expressed that this partnership will open avenues for Wheels Up to enhance its strategic, operational, and financial aspects in the coming months and years. Bastian noted that it would accelerate Wheels Up’s trajectory towards profitability.
Before this announcement, Delta was the largest individual shareholder of Wheels Up, holding a 20 percent stake in the company. This stake had been acquired in exchange for selling Delta Private Jets to Wheels Up in 2013. Notably, Wheels Up had previously revealed its decision to relocate its operations center to Atlanta, where Delta is headquartered. This move was accompanied by the appointment of retired Delta executive Dave Holtz as the Chairman of Operations.
Wheels Up recently released its financial report for the second quarter of 2023, demonstrating losses of $161 million against revenues of $335 million. While the report highlighted the progress initiated by Todd Smith’s reform measures, which aimed at addressing a string of losses that had amounted to nearly $1 billion over the previous nine quarters, more time is needed for these reforms to manifest as profitability.
Despite the $15 million financial assistance provided by Delta, Wheels Up was facing potential challenges in maintaining loan covenants for its aircraft. As the second quarter concluded, the company’s available cash had diminished to $152 million, while pre-paid flight hours by customers exceeded $800 million. This financial position prompted Wheels Up to issue a “going concern” alert.
In essence, the collaborative effort between Delta and investment partners marks a significant step toward Wheels Up’s future prospects, aiming to enhance its financial stability, operational efficiency, and strategic growth trajectory.