Kenny Dichter, founder and former CEO of Wheels Up.
Chris Goodney | Bloomberg | Getty Images
private jet company wheels up announced on Tuesday that its founder and CEO, Kenny Dichter, is resigning from his post effective immediately as the company faces mounting losses and the potential for bankruptcy.
Board member Ravi Thakran will become executive chairman, while chief financial officer Todd Smith will serve as interim CEO, the company said in a statement. Wheels Up gave no reason for the management changes, but thanked Dichter for his “vision and work” in growing sales to over $1.5 billion a year and serving over 12,000 customers.
Dichter’s departure caps a dramatic fall for one of the private jet industry’s most high-profile startups. Wheels Up once promised to be Over or Airbnb from private jets. Poet, who founded Marquis Jets in 2001 and later sold it to NetJets, launched Wheels Up in 2013 with the goal of “democratizing” private jets, making them more affordable and easier to book.
The company’s eye-catching marketing campaigns, featuring sports stars like Tom Brady and Serena Williams as brand ambassadors and investors, as well as lavish events helped the company gain members quickly.
But the stock price, which traded at over $10 a share after going public through SPAC in 2021, is now trading at about 40 cents after falling 20% on Tuesday. Its valuation has shrunk to about $100 million from once over $2 billion.
Like many private jet startups, Wheels Up has been plagued by high costs and operational issues.
The company reported $555 million in losses last year despite rising revenue and memberships. The company said it hopes to be profitable in 2024, but in its first-quarter earnings report released Tuesday, Wheels Up reported a loss of $101 million, about $12 million more than it reported a year ago Loss.
Wheels Up has been consulting with bankruptcy advisors and attorneys about a possible capital increase or restructuring, people familiar with the company’s business told CNBC.
Wheels Up announced in its earnings release on Tuesday that it is changing its pricing plan and product offering to better serve customers and become more efficient. For example, it’s moving away from less profitable markets in the West to focus more on the Northeast and other more active routes.
A traditional single Wheels Up membership has an initiation fee of $17,500 and an annual subscription of $8,500, with passengers paying an additional hourly cost depending on aircraft type.
Tom Brady uses Wheels Up.
Source: Wheel’s Up
Industry experts say Wheels Up will be difficult to spin.
“It’s the right move, they had to get off unprofitable flights,” said Doug Gollan, founder and publisher of Private Jet Card Comparisons. “But it will be a big challenge.”
Questions may also arise about the poet’s generous salary package. Poet will receive his base salary of $79,167 per month, or $950,000 per year, for two years, according to an SEC filing. In addition to flying hours in Wheels Up planes, he will receive $3 million as a lump sum “in lieu of a bonus.”
In the event of bankruptcy, Wheels Up members may wonder what will happen to their jet cards. Members and customers have purchased approximately $1 billion in flight hours on cards, some of which have not been used. Industry experts say it’s unclear how or if these members would be repaid in a bankruptcy, but they would likely become junior creditors.
Warren Buffett, whose competitor NetJets is owned by Berkshire Hathaway, said this weekend, “Wheels Up has 12,600 people who’ve given them over a billion dollars in prepaid cards … and I think there’s a good chance some people later.” be disappointed.”