Wheels Up Experience Inc. has announced a series of major aircraft, commercial and financing transactions that lay the foundation for the company’s fleet modernization strategy.
Upon closing, the transactions will initiate the transition of Wheels Up’s four existing jet aircraft types to two of the most preferred and successful aircraft types in the industry – Embraer’s Phenom 300 and Phenom 300E aircraft and Bombardier’s Challenger 300 and Challenger 350 aircraft.
Once complete, the transition of Wheels Up’s jet aircraft to the Phenom 300 series and Challenger 300 series models is expected to lower the average aircraft age of its fleet by approximately 10 years – a fleet transition with wide-reaching operational implications, including expected improvement in operational performance, operational efficiency and, in turn, an enhanced customer experience.
The company intends to continue to operate in support of its customers a fleet of King Air aircraft within its existing service areas.
“It is clear to me that we already offer the most flexible, accessible and customer service solutions available in the industry, and doing so, we offer the greatest value to our current and future customers,” said said George Mattson, CEO of Wheels Up.
“We need a great fleet, which brings us to the next phase of our journey, investing in and modernizing our fleet, so [we’re] able to offer best-in-class aircraft, complemented by an unmatched premium experience in a flexible, customer-centric offer.”
Wheels Up to acquire GrandView Aviation’s Phenom fleet
Wheels Up has entered into a binding agreement to acquire the entire Phenom fleet of GrandView Aviation, a subsidiary of Global Medical Response.
The agreement provides for the acquisition of their entire fleet of 17 Embraer Phenom 300 and Phenom 300E aircraft and certain related maintenance assets to support the fleet, at a purchase price of $105 million, subject to certain adjustments.
“We know GrandView and the aircraft we expect to acquire well, through the guaranteed revenue program we put in place in November of 2021, which provided five dedicated aircraft for use by our members and customers,” said Mattson.
“We expect the transaction to close as promptly as practical in the fourth quarter, subject to closing conditions.”
Under the terms of the agreement, Wheels Up expects to assume GrandView’s existing customer programs and retain most of the existing pilot group, integrating them into the existing Wheels Up pilot workforce.
Wheels Up and GrandView also expect to enter into a short-term Transition Services Agreement at closing, under which GrandView will operate the Embraer Phenom aircraft on Wheels Up’s behalf while the aircraft are transitioned to the company’s Wheels Up Private Jets FAA operating certificate.
Wheels Up intends to grow its fleet of Phenom series aircraft by opportunistically acquiring or leasing additional aircraft in the secondary market and expects to complete the fleet transition and retire its existing fleet of light and mid-sized jet aircraft within approximately three years, subject to business and market conditions.
“Our first priority is a seamless operational transition, including pilots,” said Mattson. “We expect to retain most of GrandView’s current pilots to support our new fleet–and then, as aircraft transition to our certificate over the next few months, integrate them into our existing pilot workforce to create combined crews from GrandView and Wheels Up pilots.”
Wheels Up to introduce Bombardier Challenger aircraft
In the super mid category, Wheels Up intends to opportunistically acquire a fleet of pre-owned Challenger 300 and Challenger 350 aircraft via the secondary market through a combination of outright purchases and long-term leasing.
In preparation for this transition, Wheels Up has agreed to sell all 13 of its currently owned Citation X aircraft to an unrelated third party. The company expects to lease a portion of those sold aircraft and amend the lease terms for other Citation X aircraft that are currently leased from that same buyer.
This agreement also provides the ability to replace leased aircraft with Challenger aircraft in the future.
“We expect to begin operating Challengers in our fleet by early next year, with availability on an as requested charter basis and on specified routes for our members,” said Mattson.
The Bombardier Challenger 300 Series aircraft are expected to be introduced into Wheels Up’s fleet beginning next year, with availability on both an as-requested charter basis and on specified routes for members. A full introduction into Wheels Up’s programmatic offering across guaranteed service areas is expected by the end of 2025.
“Like the Phenom transition timeline, we expect to complete the transition to our Challengers within approximately three years,” said Mattson.
An enhanced customer experience with Gogo
As a key strategic step in enhancing the customer experience, Wheels Up has entered into a letter of intent with Gogo Business Aviation to equip the Phenom and Challenger aircraft Wheels Up expects to acquire with the enhanced capabilities and superior performance of Gogo Galileo HDX satellite-based Wi-Fi.
Gogo’s low earth orbit (LEO) satellite system is expected to deliver high bandwidth, low latency, global coverage and be capable of live streaming and voice telephony.
“We believe that providing best-in-class connectivity while in the air is a core element of the customer promise and the customer experience,” said Mattson.
“We anticipate that we will be one of the first and only domestic fleets of private aviation aircraft equipped with this level of capability and, like our partner Delta in the commercial aviation space, want to provide the highest level of connectivity and performance that available technology delivers.”
As part of the agreement, Gogo has committed to complete certification for the Gogo Galileo HDX system and plans to have HDX certification on the Challenger and Phenom platforms by the middle of 2025, with transition for Wheels Up’s updated fleet planned to begin immediately thereafter.
Committed financing to be provided by Bank of America with credit support from Delta Air Lines
Wheels Up has entered into a commitment letter with Bank of America for a new, five-year, up to $332 million senior secured revolving credit facility. The company anticipates that the revolving facility will close concurrently with the closing of the GrandView acquisition in the fourth quarter.
Wheels Up expects to utilize the revolving facility to fund several actions, including the GrandView acquisition; the redemption of all outstanding equipment notes on the company’s owned aircraft; and general corporate purposes.
The financing is also expected to deliver up to $115 million of additional cash to the balance sheet of Wheels Up and provides future revolving borrowing availability under certain conditions, with which Wheels Up expects to opportunistically acquire additional Phenom and Challenger aircraft in the future as it completes its fleet modernization plan.
Delta Air Lines is expected to provide credit support for the new financing, enhancing Wheels Up’s access to capital and on more attractive terms than would otherwise be available.
“In the year since we’ve invested in Wheels Up, their operational performance, financial progress and the successful revamp of their customer offering have validated our decision to embark on this one-of-a-kind strategic partnership,” said Ed Bastian, CEO of Delta Air Lines.
“Underpinned by those key improvements and further fuelled by the forthcoming execution of this modernized fleet strategy, we feel more confident than ever that Wheels Up is on the right track to be a global leader in private aviation, as we work together to build an unrivalled partnership spanning across commercial and private travel.”
Future fleet enhancements
Wheels Up is also in discussions with Bombardier, Embraer and other third-party providers on additional elements of its product offering and customer experience, including standardized livery and interiors. Updates are expected in the coming months.
Concurrently with this announcement, the company is filing a current report on Form 8-K with the SEC related to the GrandView acquisition and commitment for the revolving facility.
