Q3 results show Wheels Up on track towards stabilisation

Private aviation company Wheels Up has demonstrated a clear turnaround in 2024. The company’s third quarter 2024 results show that the company is making steady progress in stabilising its finances and transitioning its business model to towards profitability.

Wheels Up reported revenue of $335.1m in the quarter. This is down 39% compared with the same three months of 2023, but relatively flat compared with the past few quarters. 

Speaking to CorporateJetInvestor, CEO George Mattson noted that some of the past revenue declines were purposeful, as Wheels Up shed unprofitable business to focus on more valuable, profitable growth.

“What we’ve done in the last year is really gather momentum. And we really doubled down on the commitment to operational excellence. And the very first words out of my mouth, if I remember what I showed up the first day [of joining Wheels Up], we are going to be the best run private aviation company in the industry,” Mattson noted.

The company’s active members declined 36% to 6,899, while active users decreased by a smaller 35% to 8,215, indicating better user retention. The company’s on-time performance and completion rate remained stable at high levels of 82% and 98% respectively during the quarter. However, live flight legs decreased by 23% to 12,776, while  gross bookings fell 20% to $204.3m and total gross bookings declined 16% to $255.1m.

Despite the top-line challenges, Wheels Up’s gross profit improved 209% year-over-year during the third quarter of 2024 to $14.6m from $4.7m in the same period last year.

One of the most impressive aspects of Wheels Up’s performance over the last few quarters has been its ability to expand contribution margins significantly, even with flat revenues. The company reported a contribution margin of 14.8% in Q3 2024, up 380 basis points year-over-year and 700 basis points sequentially.

CFO Eric Cabezas attributed this margin improvement to the team’s focus on “making tremendous pride in that level of execution and not really focusing on growth for growth’s sake, but valuable growth, profitable growth, delivering for customers while building a sustainable business model.”

Wheels Up has also made substantial progress in reducing its cash burn. In Q3 2024, the company’s net cash outflow from operating activities improved by 94% year-over-year, declining from $250m to $15m. Cabezas noted that this improvement was driven by the increase in EBITDA profitability as well as stabilisation in the company’s deferred revenue.

Moreover, stable revenue, coupled with better gross and contribution margins, narrowed the company’s loss during the quarter to $57.7m compared to $144.8m in the same quarter of last year.

Overall, for the nine months ended September 30, 2024, Wheels Up reported a net loss of $252.1m, an improvement of 38% compared to the $406.3m in the prior year period. Additionally, during the nine months, the company significantly reduced its net cash used in operating activities by 82% to $115.8m, putting it in a stronger liquidity position to execute on its strategic initiatives.

Wheels Up is also in the midst of a strategic transition to reposition its business for long-term success. The company is in the process of transitioning its fleet, with existing aircraft being replaced by newer, more efficient models. Mattson explained that the unit economics of the incoming aircraft are better than the outgoing models, which should further improve the company’s profitability. With fleet upgradation, Wheels Up is also pivoting to target a new customer base, specifically focusing on more value-conscious leisure travellers and the Delta corporate customer segment.

When asked whether the company is targeting a 50:50 split between leisure and corporate customers, Mattson noted that: “It’s kind of organically going where it’s going, but certainly corporate is growing faster than individual and we expect corporate to continue to grow faster than individual. And whether it lands at 50-50 or even north of 50-50, I think time will tell, but I certainly think that with Challenger and Phenom [aircraft], these are go-to corporate aircraft.”

“These [aircraft] sort of staples of the corporate fleets that people like to fly. And these are apples to apples with the companies that tend to have bigger corporate lines of business in private aviation. And so we expect that we’re going to grow that even faster with our new fleet than we would without it.”

Mattson noted that the company’s recent announcement regarding its fleet transition will open up new opportunities to compete for these customers, as Wheels Up will now be able to offer aircraft options that were not previously available.

A critical element of Wheels Up’s transition plan is the company’s liquidity and funding position. Wheels Up recently completed a $115m refinancing, which, combined with the support from its partnership with Delta, has strengthened the company’s balance sheet and liquidity position. Cabezas noted that the lower borrowing costs and seasonal surge in block sales that typically occurs in Q4 will further improve Wheels Up’s cash flow heading into 2025 and beyond.

The reduction in cash burn, coupled with the additional liquidity from the refinancing and Delta support, puts the company in a much stronger position to execute on its transition plan and achieve growth.