Kenny Dichter, founder and former CEO of Wheels Up.
Chris Goodney | Bloomberg | Getty Images
Private jet company Wheels up announced Tuesday that its founder and CEO, Kenny Dichter, is stepping down immediately as the corporate faces mounting losses and potential bankruptcy.
Board member Ravi Thakran will change into executive chairman and CFO Todd Smith will function interim CEO. he said in an announcement. Wheels Up didn’t give a reason for the chief changes, but thanked Dichter for his “vision and work” in growing revenue to over $1.5 billion a 12 months and membership of over 12,000 customers.
Dichter’s departure marks the dramatic demise of one of probably the most outstanding start-ups within the private jet industry. Wheels Up once promised to remain Uber Or Airbnb 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 cost-effective and easier to book.
The company’s flashy marketing campaigns, through which sporting celebrities resembling Tom Brady and Serena Williams were brand ambassadors and investors, in addition to lavish parties, helped the corporate quickly grow its membership.
However the share price, which was over $10 a share after going public via SPAC in 2021, is now around 40 cents after a 20% drop on Tuesday. His valuation, which was once over $2 billion, has fallen to around $100 million.
Possibility of bankruptcy
Like many private jet start-ups, Wheels Up has struggled with high costs and operational issues.
The company reported losses of $555 million last 12 months, despite revenue and membership growth. The company said it hoped to be profitable in 2024, but in its own right first quarter profit report published on Tuesday, Wheels Up reported a loss of $101 million, about $12 million greater than the loss reported a 12 months ago.
Wheels Up consulted with bankruptcy advisors and lawyers about possible capital raises or restructuring, people conversant in the corporate’s operations told CNBC.
Wheels Up said on Tuesday it was changing its pricing plan and product offerings to higher serve customers and change into more efficient. For instance, it’s moving away from less profitable markets within the West to focus more on the Northeast and other more lively routes.
The traditional individual Wheels Up membership has an initiation fee of $17,500 and an annual premium of $8,500, with passengers paying additional hourly costs depending on aircraft type.
Tom Brady uses Wheels Up.
source: Wheel’s Up
Industry experts say reversing Wheels Up will likely be difficult.
“It was the precise move, that they had to desert unprofitable flights,” said Doug Gollan, founder and editor of Private Jet Card Comparisons. “But it can be a giant challenge.
There can also be questions on Dichter’s generous pay package. In response to SEC filingDichter will receive his base salary of $79,167 a month or $950,000 a 12 months for 2 years. He can even receive $3 million as a lump sum “as a substitute of a bonus” along with flying hours on Wheels Up planes.
Within the event of bankruptcy, Wheels Up members may wonder what’s going to occur to their discard cards. Members and customers have purchased roughly $1 billion in flight hours on cards, some of which haven’t been used. Industry experts say it’s unclear how or if these members will likely be paid off within the event of bankruptcy, but they’re more likely to change into junior creditors.
Warren Buffett, whose Berkshire Hathaway owns competitor NetJets, told Wheels Up this weekend “has 12,600 individuals who have given them over a billion dollars in prepaid cards… and I feel there’s a superb probability some people will likely be upset afterward.” .