Wheels Up, Airshare Deal Could Offer A Win For Both Sides

09.08.2023 - 21:07 / forbes.com / Sunshine State

This morning’s non-binding letter of intent by Wheels Up Experience to sell its aircraft management business to Airshare could serve both parties well, say industry insiders.

Wheels Up in 2022 was the third-largest U.S. private jet operator based on charter/fractional flight hours, according to Argus TraqPak, while Airshare was in ninth place.

Separately, Wheels Up postponed its quarterly earnings announcement and said it had secured a short-term capital investment from Delta Air Lines, which owns about 20% of the flight provider.

However, its current financial situation made its aircraft management business “untenable,” say several industry executives speaking on background.

For Airshare, which currently has 58 aircraft split between its fractional ownership program and aircraft management, the deal enables it to achieve its previously stated goal of doubling its fleet size and becoming a national player.

It recently placed orders and options for 20 more Bombardier Challenger 3500s to support its shared-ownership program and expanded the primary service area for its fractional and jet card programs to Florida.

Customers arriving or departing from the primary service area, or PSA as it is referred to, only pay for the flight time they are in the airplane, so they don’t have to pay for repositioning flights. Before adding the Sunshine State, Airshare’s PSA focused on the center of the country, reaching as far west as Denver and east to Buffalo, but with wide gaps.

For Wheels Up, one executive said, “They sold their management business while they still had a management business to sell.”

Owners who don’t want to manage their own aircraft hire management companies, who then hire pilots, handle, or secure maintenance, flight permits, arrange hangar space, and oversee all the business aspects of owning a multi-million asset, including paying the bills.

To ensure they have money available when those bills come due, most management companies require owners to fund operating accounts for future expenses, generally the next two to three months. Depending on the size of the aircraft and owner usage, the money being advanced can range into the multiple hundreds of thousands of dollars.

For the most part, owners pay the money to their management company and then trust that their management company is indeed paying bills in a timely manner. If they don’t, the owner would still be responsible.

“There are situations where owners get stuck and end up paying double,” said another industry executive. If the bills are not paid by the management company, vendors come after the owner of the jet.

Wheels Up’s current financial position was already making aircraft owners skittish, sources say.

It has had to answer bankruptcy