ATLANTA - Wheels Up Experience Inc. (NYSE: UP), a prominent player in on-demand private aviation, has initiated a major fleet modernization plan, transitioning to Embraer's Phenom 300 series and Bombardier (OTC:BDRBF)'s Challenger 300 series aircraft. The company's strategic move is expected to decrease the average age of its fleet by approximately 10 years, potentially enhancing operational performance and customer experience.
The transition encompasses the acquisition of GrandView Aviation's fleet of 17 Phenom 300 and Phenom 300E aircraft for $105 million, subject to adjustments. This deal includes the assumption of GrandView's customer programs and the integration of most of their pilots into the Wheels Up team. The acquisition is anticipated to close within this quarter, with immediate integration of the Phenom fleet into Wheels Up's offerings.
Wheels Up also plans to sell its entire owned fleet of Citation X aircraft, leasing some back for a transitional period before fully integrating the Challenger series into their lineup. The Challengers are expected to join the fleet starting next year, with full incorporation into the programmatic offerings by the end of 2025.
In a bid to enhance in-flight connectivity, Wheels Up has inked a letter of intent with Gogo (NASDAQ:GOGO) Business Aviation to equip the incoming Phenom and Challenger aircraft with Gogo Galileo HDX satellite-based WiFi. This upgrade promises high bandwidth and low latency, aiming to be one of the first domestic fleets with such advanced technology.
To finance these initiatives, Wheels Up has secured a commitment from Bank of America for a five-year, up to $332 million senior secured revolving credit facility, with Delta Air Lines (NYSE:DAL) providing credit support. This financial backing is expected to facilitate the GrandView acquisition, redemption of outstanding equipment notes, and other corporate purposes, potentially adding $115 million in cash to Wheels Up's balance sheet.
Delta's CEO, Ed Bastian, expressed confidence in Wheels Up's trajectory, highlighting the strengthened partnership between the two companies. Wheels Up's future plans include discussions with Bombardier, Embraer, and other providers to further enhance their product offerings and customer experience.
This fleet modernization strategy is a significant step for Wheels Up, aiming to solidify its position in the private aviation industry. The company remains focused on providing premium travel solutions, with digital platforms like their app and website facilitating convenient booking for members and customers.
This article is based on a press release statement from Wheels Up.
In other recent news, Wheels Up Experience Inc. has been making notable strides. The private aviation company reported Q2 earnings of $196 million, despite a GAAP net loss of $97 million, showing an impressive reduction in cash burn by 63% compared to Q1. Operational improvements were evident with a 99% completion rate, an 87% on-time performance, and a record 31 days of zero cancellations.
The company also saw a significant increase in block sales, over 25% sequentially and over 50% year-over-year, partly attributed to its strategic partnership with Delta Airlines. In terms of leadership changes, Wheels Up announced the appointment of Meaghan Wells as its new Executive Vice President of Enterprise Planning and Strategy, and Matthew Knopf as the new Chief Legal Officer and Secretary, while Eric Cabezas will serve as the interim Chief Financial Officer.
In addition, Wheels Up disclosed that its lead investors, including Delta Air Lines, Inc., CK Wheels LLC, and Cox Investment Holdings, LLC, have agreed to extend the lock-up period for their shares until September 20, 2025. This extension, which also involves Kore Capital LLC and funds managed by Whitebox Advisors LLC, covers nearly 97.2% of the shares under the Investment and Investor Rights Agreement. These recent developments reflect Wheels Up's ongoing efforts towards operational excellence and sustainable growth.
InvestingPro Insights
Wheels Up Experience Inc.'s (NYSE: UP) ambitious fleet modernization plan comes at a critical time for the company, as recent financial data from InvestingPro reveals some challenging metrics. The company's revenue for the last twelve months as of Q2 2023 stood at $959.83 million, with a concerning revenue growth decline of -36.67% over the same period. This decline is even more pronounced in the quarterly figures, with Q2 2023 showing a -41.42% revenue drop.
These figures align with an InvestingPro Tip indicating that the company is "quickly burning through cash." This cash burn situation underscores the importance of the newly secured $332 million credit facility, which could provide crucial liquidity for Wheels Up's strategic initiatives.
Another relevant InvestingPro Tip notes that the company "operates with a moderate level of debt." This moderate debt level, combined with the new credit facility, suggests that Wheels Up is leveraging financial resources to fund its transformation, betting on improved operational efficiency from the newer fleet to turn its financial performance around.
The fleet modernization strategy appears timely, given that InvestingPro data shows the stock price has fallen significantly over the last three months (-35.29%) and year-to-date (-39.07%). This move could potentially reinvigorate investor confidence and address operational inefficiencies.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Wheels Up, providing a deeper insight into the company's financial health and market position.
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