The private jet company Wheels Up merges with a special acquisition company to buy a valuation of more than $ 2 billion – more than twice its value in 2019.
The deal, which is expected to close in the second quarter, will be Wheels Up’s first, self-employed private jet company publicly traded. of private aviation.
It also highlights the rapid recovery of private airlines during the pandemic as the rich flock to the safety of private jets for travel while the commercial airline industry continues to struggle. Commercial airline traffic is 65% to 70% lower than pre-pandemic levels, while private plane bookings are at or near their pre-pandemic highs.
Under the agreement, Aspirational Consumer Lifestyle Corp., a SPAC founded by a former manager of LVMH, will merge with Wheels Up at a business value of approximately $ 2.1 billion. The deal is expected to generate approximately $ 790 million in cash proceeds, with $ 240 million in cash from Aspirational and $ 550 million from a PIPE, or ‘private investment in public equity’. The PIPE investors include T. Rowe Price, Fidelity, Franklin Advisors, Durable Capital, HG Voro Capital Management and Third Point, a hedge fund managed by Dan Loeb.
Delta Airlines, which held a stake in Wheels Up last year since the merger of Delta Private Jets with Wheels Up, will also remain a shareholder once the transaction is completed.
“2020 was the beginning of a great democratization for us,” Kenny Dichter, founder and CEO of Wheels Up, told CNBC. “We saw so many new people who had never flown privately before, and they joined Wheels Up or came to the platform and flew.”
The deal is a confirmation for Dichter, a high-octane entrepreneur who started selling T-shirts to fellow students at the University of Wisconsin and then started the awning jets, which were later sold to NetJets. Starting in 2013 with a membership model and a fleet of King Air turboprops, Dichter aimed to ward off the aviation industry from its elitist and inaccessible seat to serve a broader mass-affluent market.
Last year, the company flew more than 150,000 passengers with more than 1,500 aircraft owned, operated and third-party.
In the merger with Aspirational, Wheels Up is finding a partner in luxury marketing and expansion overseas, especially in the fast-growing Asian markets.
Aspirational CEO and Chairman Ravi Thakran is the former group chairman of LVMH South and Southeast Asia, Australia and the Middle East and former emeritus of the Asian company for L Catterton, the private equity firm that includes LVMH and Groupe Arnault as partners .
WheelsUp private jet
Source: WheelsUp
Thakran, who will be on Wheels Up’s board, will help advise the company on expanding overseas and forming partnerships for VIP events and experiences so that it can become more of a global travel and lifestyle brand. Wheels Up has successfully marketed exclusive access to major sporting events and boasts a list of well-known athletes as brand ambassadors.
The question for Wheels Up is whether it can deliver earnings growth for Wall Street shareholders, while also boosting a growing market share in an industry with a history of meager profit margins and excessive capacity. The core challenge for the private jet business is large fleets and sporadic demand which results in most private jets flying empty or with only one or two passengers. The proliferation of on-demand booking programs has made it easier for potential kites to book a private jet charter or seat, just like Uber or AirBnb.
“Ninety percent of the people who can afford to fly have not flown private jets,” Thakran said, “and 95% of the jets are idle. Only the use of next-generation technology to connect them is a wonderful play. “
Poet added: “It’s about connecting millions of customers in real time with tens of thousands of aircraft.”
Wheels Up will trade on the New York Stock Exchange under the symbol “UP”.