In its first deal since going public last July, Wheels Up Experience Inc. (NYSE: UP) has reached an agreement to buy a U.K.-based global aviation services group Air Partner PLC (LSE: AIR). The move expands its footprint to Europe with established jet card memberships and on-demand charter programs. It also brings the New York-based provider into new business lines, including Group Charter, Freight, Specialist Services, Safety, Security, Emergency Planning and Incident Response and Managed Services. Air Partner operates in 18 locations and four continents, including the U.S.
Under the terms of the all cash transaction, Wheels Up will acquire the entire issued and to be issued ordinary share capital of Air Partner for 125 GBX per share, equivalent to an enterprise value of approximately $107 million. The acquisition is expected to close later in the first quarter, subject to shareholder and regulatory clearances in the U.K. and Italy.
Wheels Up Experience is fulfilling Chairman and CEO Kenny Dichter’s plans for international … [+]
“This acquisition will allow us to offer existing and future customers even more compelling and seamless options for private travel, expand the reach of our marketplace in key markets around the world, and add important operational capabilities to our network,” said Wheels Up Chairman and CEO Kenny Dichter.
He added, “Air Partner has tremendous heritage, leadership expertise and unique capabilities that will allow us to accelerate our global strategy and credibly expand our offerings in a meaningful way.”
In its most recent full-year financials ending January 2021, Air Partner reported £274.8 ($370) million in revenues and £44.9 ($60.5) million in gross profit. Wheels Up reported $849 million of revenue for the nine months of 2021, however it had a $120 million loss during the period.
Air Partner is based at Gatwick Airport outside London, was founded in 1961 and has 450 employees.
On December 17, it reaffirmed that it was still running “materially ahead of current market expectations.” It pointed to “exceptional Freight bookings, including the transportation of vaccines (and) strong levels of trading in (jet cards and on-demand charters) in both the U.S. and the U.K.”
Then on January 7, Air Partner issued a surprise update saying, “As a result of continued strong customer demand throughout December, the Board of Air Partner now expects that underlying profit before tax for the 12 months to January 31, 2022, will be materially ahead of market expectations at the time of the December 2021 trading update.”
According to this morning’s statement, “Air Partner brings a strong financial profile with profitable operations, strong free cash flow and no significant debt. Wheels Up expects the integration of Air Partner’s historically profitable business to be accretive to Wheels Up’s contribution margin and adjusted EBITDA in the first year of acquisition.”
Regarding the deal, Air Partner CEO Mark Briffa said, “The Board believes that this combination will give our customers, colleagues and stakeholders the additional resources of one of the largest private aviation companies in the world, enabling us to significantly enhance our technology, customer offer and international aircraft supply.”
The companies said the acquisition’s footprint in Europe and globally would provide experienced management to speed Wheels Up’s international expansion.
Wheels Up said the deal will enable it “to offer customers an expanded international travel solution, including transatlantic and European travel options.”
Air Partner offers a fixed-rate jet card membership with guaranteed availability and one-way pricing in the Continental U.S. like Wheels Up. However, Air Partner has a more extensive program to the Caribbean and Mexico and offers guaranteed rate flights between the U.S. and Europe and within Europe and to the Middle East.
The move takes Wheels Up from an exclusively domestic customer base and follows Flexjet and Sentient Jet parent Directional Aviation’s expansion into Europe. Flexjet bought U.K. jet card and charter broker PrivateFly in 2018, and in 2020 launched a fractional share program there.
In recent years, Dubai-based Vista Global Holding, which is rooted in Europe, has been expanding its VistaJet unit in the U.S. Last year it added New York-based on-demand charter broker Apollo Jets with a reported $250 million in sales and an interest in charter operator and management company Talon Air its holding. They include the 2018 acquisition of XOJet, which was split into operator XOJet Aviation and brokerage XO Global. Last year it expanded the U.S.-based XO to Europe, including XO branded midsize jets. In 2019, it acquired digital broker JetSmarter, merging it with XO and moving the company into jet sharing and by-the-seat private jet solutions, an area where it competes directly with Wheels Up.
All are chasing Berkshire Hathaway’s NetJets, Inc., the largest operator of private jets globally with a fleet of over 850 jets. In presentations to analysts before its IPO, Wheels Up executives said the international expansion would be at the forefront.
What’s next? In a written statement Wheels Up said, “Air Partner’s existing asset-light structure, with no owned aircraft or operating certificates, brings flexibility to scale Wheels Up’s international footprint more quickly and with limited capital investment.”
Still, an acquisition of an operator may not be out of the question. Over the past three years, Wheels Up acquired four of the 10 largest U.S. operators, including Gama Aviation Signature, Delta Private Jets, Mountain Air and TMC Jets. Its last fleet update reported around 350 owned, leased and managed private aircraft, including its signature fleet of King Air 350is and over 50 Citation X super-midsize jets.
Private jet demand in the U.S. remains at record levels. Yesterday, Vista Global Chairman Thomas Flohr said he expects that trend to continue through 2023. With inventory of used private jets at record lows, and not expected to change, Wheels Up has been renting jets from other operators for extended periods to meet the needs of its over 10,000 members. Air Partner has relationships with operators in Europe where it could strike similar deals.
Wheels Up is expected to report fourth-quarter financial results in the coming weeks. Despite record revenues in Q3, mounting losses pushed its stock price from a 52-week high of $15 to a bottom of $3.27. It closed yesterday at $3.62. Air Partner closed yesterday at 81 GBX, straddling its 52-week high of 104 GBX and low of 62.2 GBX.