Private jet company Wheels Up is reportedly on the verge of bankruptcy. It’s also on the verge of being de-listed from the New York Stock Exchange, with a share price that’s gone from high flyer to penny stock since going public and trading at over $11 a share two years ago.
The company lost $555 million in 2022 on approximately $1.5 billion in revenue from 12,000 customers. It reported a first quarter loss of $101 million, even larger than in 2022. Just before the pandemic Delta took a stake in Wheels Up, combining its own private jet resources and marketing the service.
Their CEO is out. And now the question is,
- Will Delta put more money in or cut their losses?
- Can they turn the business around, or will they file for bankruptcy and then…liquidate?
- And what happens to the billion dollars in flight credits sitting on their books?
Those with prepaid flight credits could be left holding the proverbial bag,
Wheels Up’s members may wonder what happens to their jet cards. Members and customers have purchased roughly $1 billion in flight hours on cards, some of which have not been used. Industry experts say that it’s unclear how or whether those members would be paid back in any bankruptcy but they would likely become junior creditors.
Warren Buffett, whose Berkshire Hathaway owns competitor NetJets, said this weekend that Wheels Up “has 12,600 people who have given them over a billion dollars on prepaid cards…and I think there’s a good chance some people are going to be disappointed later on.”
Handling of tickets in bankruptcy is beyond my area of expertise and I would welcome readers to weigh in on strategies they’d use to hedge against bankruptcy risk if any at all.
Wheels Up allows use of funds to purchase Delta tickets. So there are a couple of thoughts here.
- Can you buy Delta tickets now, and rely on Delta’s continued operation to make use of your Wheels Up funds?
- And can you essentially move your Wheels Up credits into Delta credits this way, with future dated travel that you treat as flight credits for trips you need later on?
I hope there’s no problem using future-dated travel on Delta if paid for in Wheels Up credit. My general understanding (again, outside of my area) is that accredited agency tickets have to be honored in an agency bankruptcy even if the airline doesn’t get paid.
I’m not familiar with how these tickets are issued – if they’re issued by Delta (in which case they’d have a hard time cancelling) or via an agency, where it seems like travel should be honored.
However I am not certain the extent to which a member would be able to exercise fare rules to their fullest extent if Delta has not been paid. Refund is usually to original form of payment. They may use that as an out. And while they may have to honor the originally-booked travel I am not certain if they would have to honor use of a flight credit they weren’t paid for to book different travel.
Since Delta promotes Wheels Up there would be real damage to their brand in trying to dishonor purchases made through their partner in any case.