Delta Air Lines, Certares Management – a travel industry investment specialist – and turnaround investment firm Knighthead Capital Management, have agreed to an expanded partnership with Wheels Up Experience to accelerate the company's business transformation.
Wheels Up, the on-demand private aviation provider, was reported to be in talks with lenders to avoid a bankruptcy filing last week. In a regulatory filing, Wheels Up said that it was unable to file a quarterly report because it was expending resources working with advisors and lender to secure new strategic investments, without which it concluded that there was “substantial doubt about its ability to continue as a going concern for any meaningful period of time” after the form was filed. The deal announced today seems to have provided the much-needed reprieve for the company.
In an official announcement, the company stated that funding provided by Delta, certain affiliates of Certares and Knighthead, and other partners, “is expected to provide the company the stability to execute on its strategic vision over the long term”.
The partnership would “combine the experience of Delta, a longstanding Wheels Up partner, with the travel and tourism focus of Certares and turnaround and restructuring experience of Knighthead to boost Wheels Up as it evolves and elevates its customer experience, reliability and financial performance”.
The investment includes a non-binding agreement in principle for a $500 million facility to Wheels Up, which includes funds contributed by Delta and CK Opportunities Fund I (CK Opportunities) which is co-managed by affiliates of Certares and Knighthead. The facility would be comprised of a $400 million term loan and a $100 million liquidity facility from Delta, totalling $500 million to Wheels Up.
"The partnership will create new opportunities for Wheels Up to drive strategic, operational and financial improvements for its customers in the months and years ahead," said Delta CEO Ed Bastian. "Delta's unmatched expertise in premium travel, customer loyalty, corporate sales, operational reliability and aircraft maintenance, combined with Certares' and Knighthead's experience and global reach, are expected to speed Wheels Up on its path to profitability.
Greg O'Hara, founder and Senior Managing Director at Certares, said: "This strategic partnership with Wheels Up is a natural extension of our focus and experience in travel, tourism and hospitality. This transaction extends upon our longtime partnership with Delta across many of our portfolio companies."
Tom Wagner, Knighthead's co-founder, said: "We are delighted to be joining the Wheels Up team alongside Delta, Certares and other strategic partners. The agreement in principle announced today brings not just capital, but Knighthead's extensive expertise, experience and resources to drive the next phase of Wheels Up's business transformation as a leading provider of on-demand private aviation. We look forward to the journey ahead with our partners."
Todd Smith, Interim chief executive officer and chief financial officer of Wheels Up, said that the company had been “intensely focused” over the past few months on “taking clear steps to improve our product offering and our operational delivery”. He said that those actions were already “showing results”. “Our continued close work with the Delta team will enable us to further integrate our digital experiences, member benefits and our operations."
Wheels Up also announced that Delta chief financial officer Dan Janki will join the Board of Directors as chairman. Ravi Thakran will transition back to director from his role as executive chairman.
"I am pleased to officially welcome Dan as the Chairman of the Wheels Up Board of Directors," Thakran said. "I've been honored to lead the company through this transition and generate global interest in Wheels Up as the premier experience in private aviation. With today's announcements, Wheels Up should be in a far stronger position to leverage its considerable assets in service of our members and continue to be an innovative leader in aviation."
Under the non-binding agreement in principle, Delta will provide Wheels Up with $150 million in new money term loans and a $100 million liquidity facility. An additional $150 million term loan will be provided under the facility by CK Opportunities. Other investors have agreed in principle to join Delta and CK Opportunities to provide $50 million in term loans under the facility. The additional $50 million will be allocated to certain other investors as approved by Delta, Certares and Knighthead.
In connection with the transaction, Wheels Up will issue Class A common stock to the participating new money lenders such that they are expected to own approximately 95% of the Company following the transaction.