Private jet company Wheels Up is merging with a special purpose acquisition company to go public at a valuation of more than $2 billion — more than twice its 2019 value.
The deal, expected to close in the second quarter, will make Wheels Up the first publicly traded standalone private jet company and vaults the seven-year-old start-up past many of the industry’s longtime leaders in the race to become the Uber or AirBnb of private aviation.
It also highlights the rapid recovery of private jet companies during the pandemic, as the wealthy flocked to the safety of private jets for travel while the commercial airline industry continues to struggle. Commercial airline traffic is down about 65% to 70% from its pre-pandemic levels while private jet bookings are at or near their pre-pandemic highs.
Under terms of the deal, Aspirational Consumer Lifestyle Corp., a SPAC founded by a former LVMH executive, will merge with Wheels Up at an enterprise value of about $2.1 billion. The deal is expected to provide about $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 run by Dan Loeb.
Delta Airlines, which has an equity stake in Wheels Up from the merger of Delta Private Jets with Wheels Up last year, will also remain a shareholder when the deal is completed.
“2020 was the beginning of a big democratization for us,” Kenny Dichter, Wheels Up’s founder and CEO told CNBC. “We saw so many new people who had never flown private before actually pick up and either join Wheels Up or come on to the platform and fly.”
The deal marks a validation for Dichter, a high-octane entrepreneur who started selling T-shirts to fellow students at the University of Wisconsin and went on to create Marquis Jets, which was later sold to NetJets. Starting in 2013 with a membership model and fleet of King Air turboprops, Dichter aimed to topple the aviation industry from its elitist and inaccessible perch to serve a broader mass-affluent market.
Last year, the company flew more than 150,000 passengers with more than 1,500 owned, managed and third-party partner aircraft.
In merging with Aspirational, Wheels Up gains 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 Middle East and former chairman emeritus of the Asia business 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 overseas expansion and forming partnerships for VIP events and experiences to help it become more of a global travel and lifestyle brand. Wheels Up has had success marketing exclusive access to major sporting events and boasts a roster of celebrity athletes as brand ambassadors.
The question for Wheels Up is whether it can produce earnings growth for Wall Street shareholders while also growing market share in an industry with a history of slim profit margins and excess capacity. The core challenge for the private jet business is large fleets and sporadic demand that results in most private jets flying empty or with only one or two passengers. The proliferation of on-demand booking apps has made it easier for potential fliers to book a private jet charter or seat just as they would an Uber or AirBnb.
“Ninety percent of the people who can afford to fly have not flown private jets, ” Thakran said, “and 95% of the planes are sitting idle. Just using next-gen technology to connect those is a great play.”
Added Dichter: “It’s about connecting millions of customers with tens of thousands of airplanes in real-time.”
Wheels Up will trade on the New York Stock Exchange under the ticker symbol “UP.”