Private aviation supplier Wheels Up, which began to revamp its
business about a year ago, reported improvements in its financial performance,
according to its third-quarter results filings and presentation.
"After seven quarters of sequential revenue decline
leading into the current year and following last year's restructuring of our
operations and the revamping of our commercial offering to shed unprofitable
flying, our revenue stabilized in 2024, [and] our live leg demand in the
quarter was flat sequentially versus an industry decline of over 15
percent," Wheels Up CEO George Mattson said during a Thursday morning
earnings call, adding that "that outperformance has continued in the month
of October."
The company's adjusted contribution margin was 14.8 percent,
the highest in the company's history as a public company, Wheels Up interim CFO
Eric Cabezas said. It was up "significantly" sequentially from 7.8
percent in the second quarter and from 1 percent reported in the first quarter.
The elements that contributed most to that stabilization include
improved operational efficiency, higher asset utilization, higher aircraft
utilization "which is up 26 percent year over year," lower cost of
recovery due to a higher rate of maintenance availability and fewer
interruptions, and significant growth in the company's profitable charter
business, Mattson told BTN during a Wednesday pre-earnings call. "Those
are the main drivers of how we've achieved 14 points of margin improvement in
just three quarters, and we see that continuing into Q4."
The next phase of Wheels Up's strategy includes a fleet
modernization plan that the company announced in October, which will
include the phasing out of current types of aircraft for Embraer Phenom and
Bombardier Challenger planes. Mattson noted that those brands have been the
most popular aircraft types for the last decade, and "if you had to pick
an airplane that any corporate fleet or any corporate travel department is
likely to want to select for their executives, it's those two aircraft. We
fully expect that this ability to now access those aircraft that [corporates]
prefer through Wheels Up is going to further enhance our relationship with the
corporate customers in Delta."
Corporate Segment Strength
Delta Air Lines is one of the key investors in Wheels Up,
and the companies have taken advantage of synergies from that relationship for
the corporate travel market.
"Our corporate business continues to grow and continues
to grow faster," Mattson said. "It's the fastest segment of our
portfolio from a growth perspective relative to individual leisure, which was
the predominant focus from earlier days."
Corporate block sales increased more than 50 percent year
over year, Cabezas said during the Thursday earnings call. "We are pleased
with our increased traction with corporate customers," he said. "The
strength and prepaid block sales mirrors improved service metrics to continued
strengths of our Delta relationship and highlight how our customers are
increasingly committing to us." Overall prepaid blocks were 147 million
for the quarter, up 86 percent from a year prior, he added.
Wheels Up had "the highest level of corporate and the highest
level of new corporate within the quarter that we've seen," Mattson told
BTN. "The Delta corporate sales initiative has built some real momentum. A
lot of the conversions we're doing now were started a couple of quarters ago.
It takes a while for that pipeline to build [and] convert, and we're starting
to see signs of that in our performance already."
Wheels Up also has a dedicated salesperson who works to
"connect the dots between our sales teams and [Delta's] sales team,"
Mattson said. "We are doing joint sales meetings together. We are
participating in Delta-sponsored conferences, like the annual Insights
conference they have every year for their top 300 buyers. GBTA. We're doing a
lot of outreach webinars and other things with their customers through their
sales team. And their whole sales team has been trained on Wheels Up and how to
think about Wheels Up as basically an extension of Delta's premium commercial
offering and an integrated extension of it."
Mattson added that though Wheels Up had and continues to
have its own corporate customer relationships from before Delta "partnered
in earnest with us a year ago," Delta is the "centerpiece of our
corporate strategy," he said. "Delta has over 40,000 corporate
customers, so that's multiples of the size of our business. Bringing those
folks in is going to have a great impact on the smaller base of Wheels Up
itself."
Wheels Up Q3 Metrics
Wheels Up reported third-quarter revenue of $193.9 million,
down from the $320 million reported a year prior, due "primarily to the
sale of non-core businesses and [its] focus on profitable flying,"
according to the company, which added that the figure had stabilized at levels
consistent with the first and second quarters of 2024.
Third-quarter total gross bookings were down 16 percent year
over year to $255.1 million. Net loss was $58 million, down from a Q3 2023 net loss
of $144.8 million and down from a Q2 2024 net loss of $97 million.
Active members for the quarter were down 38 percent year
over year to about 6,700, while active users declined 35 percent to 8,215. Live
flight legs were down 23 percent to 12,776. Private jet gross bookings per live
flight leg increased 4 percent to nearly $16 million.
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