How Delta’s stake in the private jet industry could be a lifeline for the airline

5d ago

This post contains references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. Terms apply to the offers listed on this page. For an explanation of our Advertising Policy, visit this page.

There’s no doubt that airlines are struggling and recent earnings reports have only reaffirmed that. Many airlines are now leaning on ancillary businesses to help navigate through these challenging times.

While loyalty programs are a popular one, for Delta, its stake in the private jet industry might become another big revenue source.

For more TPG news and deals delivered each morning to your inbox, sign up for our daily newsletter.

In January 2020, Delta sold its Private Jets division to Wheels Up. Terms were not disclosed at the time — all we knew was that the airline would retain an unspecified equity stake in the privately held company. However, as pointed out by Private Jet Card Comparisons, the airline released a number of details relating to the deal for the first time in its 10-Q filing for the quarter ended Sept. 30, 2020.

According to Delta CEO Ed Bastian, the private jet unit was “marginally profitable” before the acquisition. “We’ve never been able to leverage and garner the type of marketing power and brand that a Wheels Up will provide,” he explained.

Delta’s recent filing reveals that the airline received a 27% equity stake in Wheels Up. It was recorded as a gain of $240 million, inferring a $890 million value for the combined business.

This has since been adjusted to a 25% stake and carrying value of $234 due to additional share issuances to Wheels Up employees. Still, this stake is worth nearly double its 9% holding in Air France-KLM, which is valued at $130 million. It’s also more valuable than its stake in China Eastern, valued at $199 million.

Related: Flying private with Wheels Up as Delta Air Lines makes key change

The newly combined company, which has since also acquired Gama Aviation, now has a total fleet size of over 300 aircraft, ranging from the King Air 350i to large-cabin jets. Wheels Up is now the second-biggest private aviation company in the U.S.

And Delta’s stake in the company is only going to get more valuable.

Private jet companies have seen an unprecedented surge in business in recent months amid coronavirus fears. “Wheels Up’s individual demand, corporate demand, and interest in our program has gone up since the start of reporting on Corona,” Kenny Dichter, CEO of Wheels Up, said in a statement to Yahoo Finance.

Related: Yes, you can fly private — here’s the secret that will help you do it

As a part of the current partnership, Wheels Up members have the opportunity to fast-track Delta Medallion status, earn Delta SkyMiles, get discounts on select Delta fares and more. However, experts suggest that this partnership may grow and Delta may one day begin selling seats on shared Wheels Up flights on its own platforms. This could result in cheaper private jet flights.

Featured image courtesy of Delta.

Chase Sapphire Preferred® Card

WELCOME OFFER: 80,000 Points

TPG'S BONUS VALUATION*: $1,600

CARD HIGHLIGHTS: 2X points on all travel and dining, points transferrable to over a dozen travel partners

*Bonus value is an estimated value calculated by TPG and not the card issuer. View our latest valuations here.

Apply Now
More Things to Know
  • Earn 80,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $1,000 toward travel when you redeem through Chase Ultimate Rewards®.
  • 2X points on travel and dining at restaurants worldwide, eligible delivery services, takeout and dining out & 1 point per dollar spent on all other purchases.
  • Get 25% more value when you redeem for airfare, hotels, car rentals and cruises through Chase Ultimate Rewards. For example, 80,000 points are worth $1,000 toward travel.
  • Get unlimited deliveries with a $0 delivery fee and reduced service fees on orders over $12 for a minimum of one year on qualifying food purchases with DashPass, DoorDash's subscription service. Activate by 12/31/21.
  • Earn 5X points on Lyft rides through March 2022. That’s 3X points in addition to the 2X points you already earn on travel.
Intro APR on Purchases
N/A
Regular APR
15.99%-22.99% Variable
Annual Fee
$95
Balance Transfer Fee
Either $5 or 5% of the amount of each transfer, whichever is greater.
Recommended Credit
Excellent/Good

Editorial Disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.