Wheels Up lost more than half of its stock market value on Thursday after The Wall Street Journal reported it had hired a law firm specializing in restructuring of companies in financial distress. The company issued a statement say it’s “working with a number of advisors and industry participants around securing new strategic investments, raising capital, and executing previously disclosed strategic divestitures.” With that tumble company shares dropped to $1.24, just 2 percent of their original value when the company went public in 2021.
Wheels Up has never been profitable and the company maintains that it is working towards black ink. Last month company founder Kenny Dichter resigned as CEO amid growing concerns about its viability. Company officials have said bankruptcy is not an option, but it’s not clear if the Thursday report marks a change in the posture. Meanwhile, the statement says it has some ideas on how to keep the company afloat. “Wheels Up Experience continues to progress with redesigned programs to better serve its members and customers in support of our path to profitability,” the statement said.
Last year the company lost $500M on $1.5B in sales. It owes jet card holders another $1B. Even a kid with a lemonade stand knows that you can’t stay in business too long if you sell 3 cups of lemonade and get enough nickels and dimes to cover the cost of 2 cups.
Delta Airlines knows a lot about about lemonade sales. Delta owns about 30% of the UP stock…..certainly Delta hasn’t been a spectator in the UP losses since 2020. So what is really going on? Last month when UP officials told us “bankruptcy was not an option” Delta was assuring UP jet card holders that they would get first class seats on the mothership in exchange for their jet card purchases. As a stockholder of UP can Delta Airlines assume random debts of UP or did they just volunteer to take on all of the debt at UP?
The next few weeks should be interesting at the UP lemonade stand.
The academic definition of an entrepreneur is “a person attempting to create a need where there is none”. UP has this problem. They believe that flying football stars to contract negotiations creates unlimited revenue opportunities. It doesn’t. However, there is a real, untapped market for the services they provide. If they are smart enough to reach out to me I’ll let you know how it goes. OTW, I’m happy enough flying my own plane(s).
Stay by your phone, I’m sure they’ll be calling you any minute now.
Investing in aviation is the very definition of the triumph of hope over experience.
Is there any other line of business that has destroyed more investor wealth in the last 100 years ?
Maybe: The U.S. Financial Sector, 2007-2009, sloppy lending practices. It led to a global economic downturn and affected the confidence of investors around the world.