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Kenny Dichter, Founder and Former CEO of Wheels Up.
Chris Goodney | bloomberg | Getty Images
Private Jets Company Wheels It was announced on Tuesday that its founder and CEO, Kenny Dichter, would step down immediately as the company faces mounting losses and the possibility of bankruptcy.
Board member Ravi Thakran will become CEO, while Chief Financial Officer Todd Smith will serve as interim CEO of the company. he said in a statement. Wheels Up did not give a reason for the executive changes, but thanked Dichter for his “vision and work” in growing revenue to more than $1.5 billion annually and membership of more than 12,000 customers.
Dichter’s departure culminated in the dramatic downfall of one of the most iconic startups in the private jet industry. Wheels Up once promised to become Uber or Airbnb from private jets. Dichter, who founded Marquis Jets in 2001 and later sold it to NetJets, launched Wheels Up in 2013 with the goal of “democratizing” private jets and making them more affordable and easier to book.
The company’s flashy marketing campaigns, featuring celebrity athletes like Tom Brady and Serena Williams as brand ambassadors and investors, as well as lavish events helped the company rapidly increase membership.
But its stock price, which traded for more than $10 a share after going public via SPAC in 2021, is now trading at about 40 cents after a 20% drop on Tuesday. Its valuation, which once exceeded $2 billion, has dwindled to around $100 million.
The possibility of bankruptcy
Like many private jet startups, Wheels Up has faced rising costs and operating issues.
The company reported losses of $555 million last year, even as revenue and memberships increased. The company said it hopes to be profitable in 2024, but at First quarter earnings report Released on Tuesday, Wheels Up reported a loss of $101 million, about $12 million greater than its reported loss a year ago.
Wheels Up has been consulting with bankruptcy advisors and attorneys about potential capital increases or restructurings, people familiar with the company’s dealings told CNBC.
Wheels Up said in its earnings release 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 avenues.
A traditional single Wheels Up membership has an initiation fee of $17,500 and annual dues of $8,500, with passengers paying additional hourly costs depending on the type of aircraft.
Tom Brady uses Wheels Up.
Source: Wheel’s Up
Industry experts say turning the wheels will be tough.
It’s the right move, they had to get out of unprofitable flights,” said Doug Gollan, founder and editor-in-chief of Private Jet Card Comparison magazine. “But it will be a huge challenge.”
There may also be questions about Dichter’s generous pay package. according to SEC fileDichter will receive a base salary of $79,167 per month or $950,000 per year for two years. He will also receive a $3 million lump sum “in lieu of a bonus” plus flying hours on Wheels Up planes.
In the event of bankruptcy, Wheels Up members may wonder what happens to their jet cards. Members and customers bought about $1 billion in flying hours on cards, some of which went unused. Industry experts say it’s unclear how or if these members will recover their money in bankruptcy, but they could potentially become small creditors.
Warren Buffett, who owns rival Berkshire Hathaway NetJets, said Wheels Up this weekend “has 12,600 people who’ve given them over $1 billion on prepaid cards…and I think there’s a good chance some people will be disappointed later.” .
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