Wheels Up Fleet Modernization And $332 Million Financing

Over the next three years, private aviation provider Wheels Up is planning to transition from four different types of jet aircraft to just two: the Phenom 300 Series and Challenger 300 Series. To kick off this transition it is acquiring GrandView Aviation and has arranged financing from Bank of America.

Fleet Modernization Strategy

The company plans to transition approximately 100 jet aircraft across four current aircraft models to Embraer's Phenom 300 series and Bombardier's Challenger 300 series platforms.

The existing fleet which will be “retired” consists of the Citation CJ3, Hawker 400XP, Citation Excel/XLS, and Citation X. The goal is to complete this transition within three years, subject to business and market conditions.

During this period Wheels Up will continue to operate a fleet of King Air 350i aircraft in the current Primary Service Area.

This change is expected to reduce the average age of aircraft in the Wheels Up operated fleet by approximately 10 years. “We expect the transition to replacement aircraft types, well known in the industry for their best in class, operational reliability, will drive a step change improvement in operational performance, efficiency and in turn, and enhanced customer experience,” said George Mattson, CEO of Wheels Up, adding “My operating team cannot wait to get their hands on these aircraft service for our customers.”

The fleet transition will be accelerated by two expected aircraft transactions. The first is the acquisition of Phenom series aircraft from GrandView Aviation (discussed below) and the second is the sale of, and restructured leases for, the current Citation X fleet.

The Phenom 300 series has been the best-selling light jet platform for more than a decade. Compared to the equivalent aircraft that Wheels Up is retiring, the Phenom offers a larger cabin, expanded luggage storage, longer range, higher reliability, superior ergonomic design and cross over capability with midsize aircraft. It is often a preferred corporate aircraft.

The Challenger 300/350 series has been the best-selling super-mid jet platform for more than a decade. Compared to the Citation X it offers a larger stand-up cabin, a flat floor, expanded luggage storage, longer range, higher reliability, a full galley and is often a preferred corporate aircraft.

GrandView Aviation Acquisition

Wheels Up has entered into a binding agreement to acquire the entire Phenom 300 series fleet of GrandView Aviation, a subsidiary of Global Medical Response, at a purchase price of $105 million. The GrandView acquisition is expected to introduce 17 Phenom 300 and Phenom 300E aircraft into service in 4Q 2024 and includes related maintenance assets to support the fleet, as well as existing customer programs.

This is the largest on-demand fleet of Phenom 300 series aircraft, and the planes have an average age of approximately 7 years.

Wheels Up expects to enter into a Transition Services Agreement with GrandView Aviation under which they will continue to operate the aircraft for a short period after closing and these Phenoms are expected to be transitioned to the Wheels Up operating certificate by early next year.

Wheels Up also intends to further grow its fleet of Phenom series aircraft by opportunistically acquiring or leasing additional aircraft in the secondary market.

Super-Mid Transactions

Wheels Up intends to opportunistically acquire a fleet of pre-owned Challenger 300 and Challenger 350 series aircraft via the secondary market through a combination of outright purchases and long-term leasing. They expect to begin operating Bombardier Challenger aircraft in the fleet by early next year and to complete the transition to the Challenger fleet within approximately three years.

Related to this move, Wheels Up has agreed to sell all thirteen Citation X aircraft, currently owned by Wheels Up, to an unrelated third-party. It has also entered into leases for a portion of those sold Citation Xs, while amending the lease terms for other Citation X aircraft that are currently leased from that same buyer.

New Financing

Concurrent with the anticipated closing of the GrandView Aviation transaction, the company expects to enter into a new five year $332 million revolving credit facility provided by Bank of America, with credit support from Delta Air Lines.

This new revolving credit facility is expected to support four (4) main actions:

1. Refinance the existing aircraft debt facility secured by first-priority liens on the owned aircraft fleet.
2. Fund the purchase of the seventeen Phenom 300 and Phenom 300E aircraft from GrandView Aviation.
3. Expected to deliver up to $115 million of additional cash to Wheels Up's balance sheet.
4. Provide future revolving borrowing availability for the fleet modernization strategy as they opportunistically acquire additional aircraft.

GoGo Connection

As part of the modernization Wheels Up has entered into a letter of intent with Gogo Business Aviation to equip the new Phenom and Challenger fleets 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, universal 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 George Mattson, Wheels Up CEO. "We anticipate that we will be one of the first and only domestic fleets of private aviation aircraft equipped with this level of capability.”

Delta Air Lines and other investors acquired control of Wheels Up last year, and have brought in a new management team, including CEO George Mattson. At last months NBAA-BACE trade show George Mattson noted “working with Delta over the last year, to deliver a broader array of customer centric aviation solutions, has attracted new customers to private aviation and to our platform.” The transactions above are part of this ongoing transformation of the company, which has included opening a new operations center, moving the headquarters to Atlanta (near the home of Delta), and streamlining its product and membership offerings.

"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 fueled 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 unrivaled partnership spanning across commercial and private travel."