Friday, October 06, 2017

Wheels Up finds altitude in private jet marketplace

Access to the elite world of private jets has been widening with a number of fractional ownership and jet-sharing companies finding their wings in the marketplace. Unlike some of its competitors, Wheels Up is a tech-enabled company that owns its fleet. Members gain access to the fleet to use when and where they want.

Before founding Wheels Up four years ago, the leadership team ran Marquis Jets, which was later sold to Columbus, Ohio-based NetJets.

The key to Wheels Up’s early success has been the purchase of it its fleet of “flying SUVs,” the King Air 350i, the company’s executives say. By owning the fleet, Wheels Up was able to lower the cost of flying in an eight-seater airplane by 50 percent, further opening up the ultra-rich world of private aviation to the merely wealthy — and increasingly, to corporations. Wheels Up specializes in two-hour-or-less flights; South Florida members typically use it for intra-state service, flights to the Bahamas and Caribbean, including Cuba, and to cities throughout the eastern seaboard.

In the past four years, Wheels Up has added more than 4,000 members, and it is generating about $300 million in annual revenue, company founder and CEO Kenny Dichter said. Initial memberships cost $17,500 for an individual, $29,500 for a corporation, and less than that yearly to continue membership.

Wheels Up, which is based in New York City, is opening its first physical Florida office, in Coral Gables, to be led by Wheels Up partner Justin Firestone. The company has raised about $200 million in funding, including about $117.5 million announced Friday, valuing the company at more than $1 billion, the company said. Its equity investors include T. Rowe Price and Fidelity, as well as Miami-based Krillion Ventures and former baseball stars Alex Rodriguez and Mike Piazza. KKR is an investor on the debt side.

“We are setting the business up to be a public offering in the next 12 to 18 months,” said Dichter in a phone interview.

With Serena Williams among its ambassadors, Wheels Up has a 80-plane fleet, including 65 King Airs, and plans to have more than 100 planes by the end of 2018.

Justin Firestone, a founding partner with Wheels Up, will lead the company’s new Florida office, which will be located in Coral Gables.

The Miami Herald followed up with Firestone, who is based in Miami, to discuss Wheels Up’s Florida plans and the industry. Here are excerpts of the conversation.

Q: Your team has a great deal of experience in private aviation. What got you interested in this market?

A: What I’ve always liked about private aviation is the idea of being able to sell access to the most precious commodity; the gift of time. When I entered the private aviation industry nearly 20 years ago, there were really only two options, buy your own aircraft or charter one when the owner wasn’t using it. Wheels Up changed this by broadening the aviation marketplace and providing a private aviation solution for people that truly value their time.

Q: What did you learn from one of your first private jet businesses, Marquis Jet, and how does Wheels Up differ?

A: We learned that 80 percent of private flights in North America are less than two hours, so we created a model that addressed the largest available market of flights at a price point that is about 50 percent less than what I was selling in my past life. Between 30 percent and 35 percent of new Wheels Up members were previously flying commercial. We see an addressable market of 1.5 million U.S. households, which will support sustainable growth. We like to say that Wheels Up is more Netflix than NetJets. Wheels Up is a membership model more like Costco, Amazon Prime, or Netflix.

We looked to further democratize the private aviation industry with a disruptive price point and create the most economical way to fly private. With Wheels Up, you pay an initial membership fee and then a nominal annual fee to stay current.

Q: One big differentiator from your competition, including Fort Lauderdale-based JetSmarter, is that you own your fleet, which is certainly capital-intensive. Why did you choose to do that?

A: Owning the fleet allows Wheels Up to provide flexibility, consistent service and safety. Also, partnering with Textron Aviation, one of the strongest brands in the business, gives Wheels Up exclusivity on the King Air 350i in a fleet format.

Q: What are some of your other differentiators from your current competition?

A: Wheels Up is redefining the industry by making private aviation more accessible by eliminating unnecessary costs and hourly commitments often associated with other privation aviation programs. Because we have a members-only fleet of King Air 350i and Citation Excel/XLS, we can offer guaranteed access to our members with as little as 24 hours’ notice which provides unparalleled flexibility and convenience.

The cutting-edge Wheels Up app allows members to seamlessly book flights, manage their accounts, participate in ride-share opportunities and select Hot Flights, a vast selection of one-way “empty leg” flights that are posted daily to the app and updated in real time.

Our members also have access to Wheels Down, a collection of signature events and private meet-and-greets, as well as a platform of value added member benefits.

Q: Why did you choose the King Air 350i?

A: When Wheels Up made the initial order to start this business, we placed a $1.4 billion order with our partner Textron Aviation for 105 King Air 350i aircraft that gave us exclusivity of the aircraft in a fleet format. The King Air 350i is a flying SUV with unmatched comfort, range and efficiency and a disruptive hourly price point. The unrivaled short field capabilities of the aircraft gives members access to more airports, landing them closer to their destinations. The King Air 350i offers the ideal aviation solution for the majority of private flights, which we know are less than two hours in duration.

Q: What kind of job creation does Wheels Up support?

A: We are proud to say Wheels Up is made in America. Textron Aviation manufactures the King Air 350i in Wichita, Kansas, and also operates one of their largest U.S. factory service centers in Orlando. Many of our 325 pilots are full-time Florida residents, and much of their simulated training happens at Flight Safety International learning centers across the state.

Lastly, the impact we have on private jet terminals is significant as we fly into hundreds across the state of Florida.

Q: You are opening your first physical office in Florida soon, in Coral Gables. Why is Florida, and in particular South Florida, a good market for Wheels Up and the industry?

A: South Florida has been one of the fastest-growing markets for Wheels Up along with the Northeast corridor, Texas, mid-Atlantic and Southern California. With approximately 500 of our nearly 4,000 members located in Florida, we’ve seen a nice mix of leisure travelers looking to getaway to the Bahamas for the weekend and business travelers looking to fly routes like Boca Raton to Tallahassee, Tampa to West Palm Beach, etc.

Q: What’s on the near horizon for Wheels Up?

A: We are looking to close 2017 strong with over 4,000-plus active members, an over $300 million run rate in revenue, 86 percent retention rate and over 85 airplanes in our fleet. As we expand our fleet and introduce more cutting-edge technology, we can disrupt and redefine the space, allowing us to bring private aviation to more people than ever before.

Q: Where do you see your market going in the next five years? And the next 10?

A: By the end of 2020, our goal is to reach 10,000 members with a fleet of approximately 250 aircraft. We also project being the largest private aviation company in the world by number of members. By 2025, the goal is 30,000-40,000 members with 300-400 aircraft.

Plans are underway for Wheels Up to expand into Europe, and we are positioning ourselves for a Wheels Up IPO in the next 12 to 18 months, provided the market conditions are right.

Q: What are a few of your most unusual or memorable flight requests over the years?

A: Flying the former first lady [Michelle Obama] to a speaking engagement just a few weeks after she left office — and no longer had access to Air Force One — and making sure there was enough room to fit the NHL’s Stanley Cup on board a flight are two of my favorites. Wheels Up is always ready!

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