Partnerships / Acquisitions

Delta Takes Minority Stake In Private Jet Startup Wheels Up

Delta Buys Majority Stake In Wheels Up

Delta Airlines has decided to take a different direction when it comes to its private jet business, announcing earlier today that it would be combining its Delta Private Jets unit with Wheels Up, which is a NYC-based privately held business that has seen quick growth, according to reports on Thursday (Dec. 12).

The exact terms of the transaction have not yet been disclosed, but the deal is targeted for completion by early 2020. According to Wheels Up CEO Kenny Dichter, Delta will become his largest shareholder, and its fleet of private jets will move to Wheels Up’s direct control. The deal was described as a merger by Delta CEO Ed Bastian.

The transaction aims to blend the “best of both worlds,” combining Wheels Up’s membership programs, digital platform and lifestyle experiences with Delta Private Jets’ much larger scale fleet of jets. At the close of the transaction, Wheels Up will have a fleet of more than 190 private aircraft and over 8,000 members and customers.

The deal follows long speculation that Delta was looking to pivot away from the business aviation and private jet markets entirely. In structure, the deal has some similarities to Delta’s choice to move out of its ground services business last year, spinning off its wholly-owned Delta Global Services to Argenbright Holdings I, LLC while holding onto a 49 percent equity interest. The service was rebranded as DGS.

“This groundbreaking partnership will democratize private aviation, making the convenience of private jet travel accessible to more consumers,” said Bastian. “Wheels Up’s lifestyle experiences and innovative digital platform, combined with the scale and service of Delta Private Jets, helps further Delta’s mission of connecting people and communities worldwide through travel. This agreement is the latest step in Delta’s ongoing effort to build partnerships that extend Delta’s brand beyond its core business.”

Dichter concurred, noting that the combined business would be greater than the sum of its parts, with the potential to provide a “transformative first for the industry.”

“The combination of Wheels Up and Delta Private Jets, along with the partnership commitments between Delta and Wheels Up, aligns with our growth objectives and vision of building a platform that will make the private flying lifestyle accessible to significantly more individuals and businesses in the U.S. and around the world,” he noted.

That is particularly important around the world – Wheels Up has long publicly stated it would like to expand into Europe specifically, and globally more generally. Delta has equity alliances with foreign airlines such as Aeromexico, Air France-KLM and Korean Air. They also own a 49 percent share of Virgin Atlantic Airways.

With the infusion from Delta, media sources indicate that Wheels Up is likely headed for a race between the other two large, up-and-coming players in the private aviation market in the U.S. and around the world: Directional Aviation and Vista Global. All three, however, are racing to dethrone the far-and-away largest player in the field: NetJets, a unit of Berkshire Hathaway.

Wheels Up’s signature innovation is a pay-as-you-go model, in contrast to the costly subscription fees and minimum use requirements that generally go along with private aviation. Despite its la carte approach, Wheels Up still promises guaranteed availability and fixed one-way rates, meaning no ferry fees, though there is a membership fee to join.

The hourly price for a private jet runs around $5,000, meaning its users will certainly not be working class, or even upper-middle class. But Dichter thinks that could change – and that services like Wheels Up, which allow groups of consumers to split a private jet to fly to a special event or group vacation, could democratize the service in the future.

But for now, Dichter noted, the focus is on continuity as the merger heads toward completion early next year.

“Delta Private Jets and Wheels Up will continue to serve and communicate with their existing employees, customers, members, partners and vendors in the same manner in which they do today,” he said.

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