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What changed in Wheels Up Experience Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Wheels Up Experience Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+735 added−734 removedSource: 10-K (2024-03-07) vs 10-K (2023-03-31)

Top changes in Wheels Up Experience Inc.'s 2023 10-K

735 paragraphs added · 734 removed · 424 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

92 edited+62 added−77 removed24 unchanged
Biggest changeWe pass recovery and recharge amounts back to owners at either cost or a predetermined margin. • Other Revenue — Other revenue consists of sales of whole aircraft, group charter revenue, cargo revenue, maintenance, repair and operations (“MRO”) revenue, fixed-base operator (“FBO”) revenue, safety and security revenue, flight management software subscriptions, sponsorships or partnership fees, and special missions revenue, including government, defense, emergency and medical transport.
Biggest changeWe generate other revenue from group charter, cargo, maintenance, repair and operations (“MRO”), fixed-base operator (“FBO”) services, safety and security services, and special missions, including government, defense, emergency and medical transport. On September 30, 2023, we completed the sale of our non-core aircraft management business to an unrelated third party.
This work may be performed by Wheels Up or a qualified third-party maintenance provider. Scheduled engine hot section repairs and overhauls are performed in accordance with the OEM’s requirements and vary by engine model. Engine repairs and overhauls are primarily driven by engine hours, engine cycles and/or calendar-based intervals.
This work may be performed by Wheels Up or by a qualified third-party maintenance provider. Scheduled engine hot section repairs and overhauls are performed in accordance with the OEM’s requirements and vary by engine model. Engine repairs and overhauls are primarily driven by engine hours, engine cycles and/or calendar-based intervals.
Also, in the case of a security threat, unusual environmental risk, or other emergency, the FAA has authority to shut down segments of airspace or even the entire U.S. airspace to civilian use, as occurred on September 11, 2001.
Also, in the case of a security threat, unusual environmental risk, or other emergency, the FAA has authority to shut down segments of airspace or even the entire U.S. airspace to civilian use, as occurred on September 11, 2001. U.S.
As an agency of the Department of Homeland Security (“DHS”), the Transportation Security Administration (“TSA”) is the principal regulator of security matters in the aviation industry. Among other things, the TSA regulates the standard security programs in use by U.S. airports and aircraft operators.
Transportation Security Administration (“TSA”) As an agency of the Department of Homeland Security (“DHS”), TSA is the principal regulator of security matters in the aviation industry. Among other things, the TSA regulates the standard security programs in use by U.S. airports and aircraft operators.
The FAA’s regulations touch on many aspects of civil aviation, such as: • the design and manufacturing of aircraft, engines, propellers, avionics and other key components (collectively the “aircraft,” as used below), including engine noise and other environmental standards; • the inspection, maintenance, repair and registration of aircraft; • the training, licensing or authorizing, and performance of duties by pilots, flight attendants and maintenance technicians; • the testing of safety-sensitive personnel for prohibited drug use or alcohol consumption; • the design, construction, and maintenance of runways and other airport facilities; • the operation of air traffic control systems, including the management of complex air traffic at busy airport facilities; • the certification and oversight of air carriers; • the establishment and use of SMS by air carriers; • the promotion of voluntary systems to encourage the disclosure of data that may aid in enhancing safety; and • the oversight and operational control of air carriers by key personnel, including directors of operations, directors of maintenance, chief pilots, chief inspectors and directors of safety.
The FAA’s regulations touch on many aspects of civil aviation, such as: • the design and manufacturing of aircraft, engines, propellers, avionics and other key components (collectively the “aircraft,” as used below), including engine noise and other environmental standards; • the inspection, maintenance, repair and registration of aircraft; • the training, licensing or authorizing, and performance of duties by pilots, flight attendants and maintenance technicians; • the testing of safety-sensitive personnel for prohibited drug use or alcohol consumption; • the design, construction, and maintenance of runways and other airport facilities; • the operation of air traffic control systems, including the management of complex air traffic at busy airport facilities; • the certification and oversight of air carriers; • the establishment and use of SMS by air carriers; • the promotion of voluntary systems to encourage the disclosure of data that may aid in enhancing safety; and 13 • the oversight and operational control of air carriers by key personnel, including directors of operations, directors of maintenance, chief pilots, chief inspectors and directors of safety.
“On-demand” operations include flights for which the departure location, departure time, and arrival location are specifically 15 negotiated with the customer or the customer’s representative as well as passenger-carrying operations conducted as a public charter under Part 380. “Part 145” contains the rules that govern the performance of aircraft maintenance at certificated repair stations.
“On-demand” operations include flights for which the departure location, departure time, and arrival location are specifically negotiated with the customer or the customer’s representative as well as passenger-carrying operations conducted as a public charter under Part 380. • “Part 145” contains the rules that govern the performance of aircraft maintenance at certificated repair stations.
Scheduled airframe maintenance inspections are defined by the applicable original equipment manufacturer (“OEM”) maintenance inspection program and as a function of flight hours, flight cycles and/or calendar-based intervals. We attempt to package these airframe maintenance inspections into strategically timed maintenance periods, with the goal of minimizing maintenance downtime while meeting the OEM’s requirements.
Scheduled airframe maintenance inspections are defined by the applicable original equipment manufacturer (“OEM”) maintenance inspection program and are a function of flight hours, flight cycles and/or calendar-based intervals. We attempt to package these airframe maintenance inspections into strategically timed maintenance periods, with the goal of minimizing maintenance downtime while meeting the OEM’s requirements.
Our marketplace platform comprises three main elements: intuitive digital front-end interfaces; a middle tier supported by data-driven optimization and pricing algorithms; and a back-end featuring a comprehensive flight operations platform, with connectivity to a network of third-party operators, supported by our proprietary cloud-based flight management system, UP FMS.
Our marketplace platform comprises three main elements: intuitive digital front-end interfaces; a middle tier supported by data-driven optimization and pricing algorithms; and a back-end featuring a comprehensive flight operations platform, with connectivity to a network of third-party operators, supported by our cloud-based flight management system, UP FMS.
(“Pratt and Whitney”) and Rolls Royce aircraft engines for certain of our owned and leased aircraft. 13 In support of the maintenance of our fleet, we operate eight maintenance facilities under FAA Part 135 or Part 145 in support of our planned and unplanned maintenance activities where Wheels Up has both the capability and the capacity.
(“Pratt and Whitney”) and Rolls Royce aircraft engines for certain of our owned and leased aircraft. In support of the maintenance of our fleet, we operate eight maintenance facilities under FAA Part 135 or Part 145 in support of our planned and unplanned maintenance activities where Wheels Up has both the capability and the capacity.
Because our technology platform is an integral aspect of our business and due to our international operations, compliance with laws 16 governing the use, collection and processing of personal data is necessary for us to achieve our objective of continuously enhancing the user experience of our mobile application and marketing site.
Because our technology platform is an integral aspect of our business and due to our international operations, compliance with laws governing the use, collection and processing of personal data is necessary for us to achieve our objective of continuously enhancing the user experience of our mobile application and marketing site.
Based on the location where line maintenance occurs, work may be performed by Wheels Up employees, as in the case of a Wheels Up facility or if performed by a Wheels Up mobile service unit (“MSU”) team, or by an FAA-authorized and Wheels Up vetted third-party maintenance provider.
Based on the location where line maintenance occurs, work may be performed by Wheels Up employees, as in the case of a Wheels Up facility, or by a Wheels Up mobile service unit (“MSU”) team, or by an FAA-authorized and Wheels Up vetted third-party maintenance provider.
CBP also oversees entry and clearance into the U.S., including with respect to exports and imports, and issues landing rights approvals for aircraft arriving in the U.S. from abroad. The Environmental Protection Agency (“EPA”) is the principal federal environmental regulator.
CBP also oversees entry and clearance into the U.S., including with respect to exports and imports, and issues landing rights approvals for aircraft arriving in the U.S. from abroad. U.S. Environmental Protection Agency (“EPA”) The EPA is the principal federal environmental regulator.
The terms on which an airport authority might lease or allow use of its property (or other property and services at an airport) can, at times, be on terms less favorable than would be customary for real estate or other transactions outside of an airport environment.
The terms on which an airport authority might lease or allow use of 14 its property (or other property and services at an airport) can, at times, be on terms less favorable than would be customary for real estate or other transactions outside of an airport environment.
Each program requires members to pay an initiation fee and annual dues and provides access to one of the world’s largest combined fleets of owned, leased, managed and third-party aircraft. Our membership model offers a simplified on-ramp to private flying with less complexity and lower up-front cost compared to traditional competitive private aviation programs.
Each program requires members to pay an initiation fee and annual dues, which provides members with access to one of the world’s largest combined fleets of owned, leased and third-party aircraft. Our membership model offers a simplified on-ramp to private flying with less complexity and lower up-front cost compared to traditional competitive private aviation programs.
Information on our website or available by hyperlink from our website is not incorporated into this Annual Report or our other securities filings and is not a part of those filings.
Information on our website or available by hyperlink from our website is not incorporated into this Annual Report or our other securities filings and is not a part of those filings. 18
Customs and Border Protection (“CBP”), also an agency of DHS, is the principal regulator of customs and immigration matters affecting the aviation industry and enforcer of certain public health matters affecting the aviation industry.
Customs and Border Protection (“CBP”) CBP, also an agency of DHS, is the principal regulator of customs and immigration matters affecting the aviation industry and enforcer of certain public health matters affecting the aviation industry.
Military. • DEI focused employee engagement events that will help elevate the knowledge and understanding of diverse communities and inclusive practices.
Military. • Hosting DEI-focused employee engagement events that will help elevate the knowledge and understanding of diverse communities and inclusive practices.
Core Membership Our Core membership is designed for private flyers who place a premium on the convenience and flexibility of guaranteed aircraft availability on all aircraft types on short notice, want price protection through capped hourly rates on the busiest industry days and want to participate in an enhanced lifestyle program of events, experiences and member benefits.
Core Membership Our Core membership is designed for private flyers who place a premium on the convenience and flexibility of guaranteed aircraft availability on all aircraft types on short notice, want price protection through capped or fixed rates on the busiest industry days and want to participate in an enhanced lifestyle program of events, experiences and member benefits.
The amount of non-voting stock that may be owned or controlled by non-U.S. citizens is limited as well. The FAA is the principal regulator of safety matters in the aviation industry.
The amount of non-voting stock that may be owned or controlled by non-U.S. citizens is limited as well. U.S. Federal Aviation Administration The FAA is the principal regulator of safety matters in the aviation industry.
These programs include elements relating to the training of flight crews, checking the identity and screening of passengers, application of security watch lists and cooperation in threat assessments and responses.
These programs include elements relating to the training of flight crews, checking the identity and screening of passengers, application of security watch lists and cooperation in threat assessments and responses. U.S.
We are also examining other sustainability initiatives, including the potential use of sustainable aviation fuel and long-range investments in other sustainability solutions, as well as operational improvements, sustainable practices at our facilities and a reduction in single-use plastics at our offices and aboard our aircraft.
We are also examining other sustainability initiatives, including the potential use of sustainable aviation fuel and long-range investments in 15 other sustainability solutions, as well as operational improvements, fleet planning initiatives, sustainable practices at our facilities and a reduction in single-use plastics at our offices and aboard our aircraft.
Our current efforts in amplifying DEI include: 18 • Establishing target diversity scorecard metrics around talent acquisition, talent movement/management, and employee engagement throughout our entire organization – from our entry level employees, all the way to the Executive Leadership Team. • The prioritization of diversifying our candidate pipeline through partnership investments with external organizations including Women Aviation International, National Gay Pilot Association, Organization of Black Aerospace Professionals, RedTail Flight Academy and the U.S.
Our current efforts aimed at amplifying DEI include: • Establishing target diversity scorecard metrics around talent acquisition, talent movement/management, and employee engagement throughout our entire organization – from our entry level employees, all the way to the Executive Leadership Team. • Diversifying our candidate pipeline through partnership investments with external organizations including Women Aviation International, National Gay Pilot Association, Organization of Black Aerospace Professionals, RedTail Flight Academy and the U.S.
A variety of federal, state, local, municipal and foreign laws and regulations, as well as industry standards (such as the payment card industry standards) govern the collection, storage, processing, sharing, use, retention and security of this information including but not limited to the California Consumer Privacy Act (“CCPA”) and the European Union’s General Data Protection Regulation (“GDPR”).
A variety of federal, state, local, municipal and foreign laws and regulations, as well as industry standards (such as the payment card industry standards) govern the collection, storage, processing, sharing, use, retention and security of this information including but not limited to U.S. state-level laws, such as the California Consumer Privacy Act (“CCPA”), the European Union’s General Data Protection Regulation (“GDPR”) and the U.K.
Sales and Account Management We have developed a sales organization to capitalize on the various lead generation efforts and customer acquisition channels of our business. Our sales organization includes the following teams: sales operations, sales directors, centralized inside sales, field sales, strategic enterprise sales, aircraft management sales, whole aircraft sales, corporate sales and charter sales.
Member Experience Sales and Account Management We have developed a sales organization to capitalize on the various lead generation efforts and customer acquisition channels of our business. Our sales organization includes the following teams: sales operations, sales directors, centralized inside sales, field sales, strategic enterprise sales, corporate sales and charter sales.
Laws and regulations relating to privacy and data protection are continually evolving and subject to potentially differing interpretations. These requirements may not be harmonized, may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another, or may conflict with other rules or our practices.
Data Protection Act 2018 (“U.K. DPA”). Laws and regulations relating to privacy and data protection are continually evolving and subject to potentially differing interpretations. These requirements may not be harmonized, may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another, or may conflict with other rules or our practices.
Membership Model We provide private aviation services through our innovative membership program, offering three membership tiers — Connect, Core and Business — which are collectively designed to address a spectrum of private aviation consumers from those with occasional usage to the most frequent of flyers.
Member Programs We provide private aviation services through our innovative membership program, offering three membership tiers — Connect, Core and UP for Business — which are collectively designed to address a spectrum of private aviation consumers, from those with occasional usage to the most frequent flyers.
Part 380 (“Part 380”), DOT also approves and oversees the performance of public charters that may be arranged by a non-air carrier public charter operator for the purpose of offering to the public charter flights that will be performed by an identified air carrier at a predetermined date and time (in contrast to the on-demand, or as-needed/where-needed, character of our air taxi operations). 14 DOT also regulates how we advertise and hold out services.
Part 380 (“Part 380”), DOT also approves and oversees the performance of public charters that may be arranged by a non-air carrier public charter operator for the purpose of offering to the public charter flights that will be performed by an identified air carrier at a predetermined date and time (in contrast to the on-demand, or as-needed/where-needed, character of our air taxi operations).
We receive collect, store, process, transmit, share and use personal information, and other customer data, including health information, and we rely in part on third-parties that are not directly under our control to manage certain of these operations and to receive, collect, store, process, transmit, share and use such personal information, including payment information.
We receive, collect, store, process, transmit, share and use personal information, and other customer data, including sensitive data for certain members, customers and employees, and we rely in part on third-parties that are not directly under our control to manage certain of these operations and to receive, collect, store, process, transmit, share and use such personal information, including payment information.
In 14 C.F.R. Part 295 (“Part 295”), DOT oversees the sale, holding out and arrangement of single entity charter air transportation (or the entire capacity of an aircraft, in contrast to public charter flights which are sold by the seat).
DOT also regulates how we advertise and hold out services. In 14 C.F.R. Part 295 (“Part 295”), DOT oversees the sale, holding out and arrangement of single entity charter air transportation (or the entire capacity of an aircraft, in contrast to public charter flights which are sold by the seat).
In addition, non-member flyers do not have the same aircraft availability guarantees as members and flights are priced dynamically. Wholesale Charter Customers In addition to our retail offerings, we provide wholesale charter services to customers such as charter flight brokers and third-party operators.
In addition, customers do not have the same aircraft availability guarantees as members and flights are priced dynamically. Additional Offerings Wholesale Charter We provide wholesale charter services to customers such as charter flight brokers and third-party operators.
We drive retention by taking a holistic view of the member journey, from onboarding to member’s booking and flight experience and extending to every moment of member engagement thereafter. We believe each of these touchpoints is an essential element of the 9 overall member experience.
Member Relationships Retention of our existing members is essential to the growth of our business. We drive retention by taking a holistic view of the member journey, from onboarding to the member’s booking and flight experience and extending to every moment of member engagement thereafter. We believe each of these touchpoints is an essential element of the overall member experience.
It is a Part 135 operator and additionally holds a Part 145 repair station certificate. It provides private aircraft charter, aircraft management, and special mission services, including International Long-Range operations, intelligence, surveillance, and reconnaissance operations, airdrop and low-cost, low-altitude operations, medevac/casevac and domestic flight operations.
It provides private aircraft charter and special mission services, including International Long-Range operations, intelligence, surveillance, and reconnaissance operations, airdrop and low-cost, low-altitude operations, medevac/casevac and domestic flight operations. • Wheels Up Private Jets LLC (“WUPJ”) is a Part 135 operator and additionally holds a Part 145 repair station certificate. WUPJ provides private aircraft charter services, and FBO and MRO services.
Additionally, we have multiple MSUs located in key markets throughout the United States to perform line-maintenance work.
Additionally, we have multiple MSUs located in key markets throughout the U.S. to perform line-maintenance work.
To the extent Wheels Up does not have the capability and/or capacity to perform maintenance or repairs in-house, we have entered into agreements with certain qualified vendors to perform maintenance on our aircraft, aircraft components and engines, generally at agreed upon work-scopes and pricing. Competitive Landscape The private aviation industry is highly fragmented.
To the extent Wheels Up does not have the capability and/or capacity to perform maintenance or repairs in-house, we have entered into certain long-term agreements with certain qualified vendors to perform maintenance on our aircraft, aircraft components and engines, generally at agreed upon work-scopes and pricing.
Non-Member Flyers Non-member flyers can sign up, ask questions, shop and book charter flights completely digitally using the Wheels Up mobile app and website. These flyers are not required to purchase a membership but may pay additional transaction fees not applicable to members. They also do not receive membership benefits.
Individual or corporate customers in the U.S. can sign up, ask questions, shop and book dynamically priced flights completely digitally using the Wheels Up mobile app and website. These flyers are not required to purchase a membership but may pay additional transaction fees not applicable to members. They also do not receive membership benefits.
Business Membership Our Business membership is designed to serve a broad spectrum of demands from our Business members, including those for whom we are the primary provider of private flights, and others for whom we may be a supplementary solution to their own aircraft operations.
UP for Business UP for Business membership is designed to serve a broad spectrum of demands for small and medium enterprise, and large corporate customers, including those for whom we are the primary provider of private flights and others for whom we may be a supplementary solution to their own aircraft operations.
The new fuel surcharge is applied when the cost of Jet A fuel, as published by the Argus U.S. Jet Fuel Index TM , is more than $2.00 per gallon and is calculated based on estimated billable flight time.
For Wheels Up operated flights, we utilize a fuel surcharge that is applied when the cost of Jet A fuel, as published by the Argus U.S. Jet Fuel Index TM , is more than $2.00 per gallon. The fuel surcharge is calculated based on estimated billable flight time.
Item 1. BUSINESS Overview of Our Company Wheels Up is a leading provider of on-demand private aviation in the U.S. and one of the largest private aviation companies in the world. Wheels Up offers a complete global aviation solution with a large, modern and diverse fleet, backed by an uncompromising commitment to safety and service.
Item 1. BUSINESS General Wheels Up is a leading provider of on-demand private aviation in the United States (“U.S.”) and one of the largest companies in the industry. Wheels Up offers a complete global private aviation solution with a large and diverse aircraft fleet, backed by an uncompromising commitment to safety and service.
Proprietary Technology, Algorithms and Data Ecosystem In an industry that historically used intuition and basic industry-wide data to drive strategy and decision-making, we are moving from intuition to algorithm. Technology and data science will be the foundation of all of our operations and strategic decision making.
Deploying Proprietary Technology In an industry that historically used intuition and basic industry-wide data to drive strategy and decision-making, we believe that technology and data science will be the foundation of our operations and strategic decision making in the future.
Our wholesale customers typically pay us an agreed fixed rate for a flight, which varies based on factors such as the aircraft type and date of the flight, and in turn sell the flight to their own retail customers. We historically provided wholesale charter services to customers in North America.
Our wholesale customers typically pay us an agreed fixed rate for a flight, which varies based on factors such as the aircraft type and date of the flight, and in turn sell the flight to their own retail customers. Other Activities & Services We provide our charter customers with global passenger, cargo, emergency and government services.
The U.S. Department of Transportation (“DOT”) is the principal regulator of economic matters in the aviation industry. As applied to our business, under Title 14 of the Code of Federal Regulations (“14 C.F.R.”) Part 298, DOT oversees the operations of our subsidiaries that operate as air taxis (i.e., on-demand operators of small aircraft).
As applied to our business, under Title 14 of the Code of Federal Regulations (“14 C.F.R.”) Part 298, DOT oversees the operations of our subsidiaries that operate as air taxis (i.e., on-demand operators of small aircraft).
We have pricing agreements with various fuel providers located across the U.S., pursuant to which we receive agreed upon pricing for fuel and handling/facility fees at each location. We are currently able to obtain adequate supplies of aircraft fuel but sustainable aviation fuel is generally more difficult to obtain due to varying cost and our “floating fleet” model.
We have pricing agreements with various fuel providers located across the U.S., pursuant to which we receive agreed upon pricing for fuel and handling/facility fees at each location. We are currently able to obtain adequate supplies of aircraft fuel.
In January 2021, the EPA promulgated new rules relating to the greenhouse gas emissions from carbon fuels used in aircraft engines. This will bring about a change in future aircraft engine designs and approvals and eventually require replacement of engines in future years. This area of regulation is not yet settled.
In January 2021, the EPA promulgated new rules relating to the greenhouse gas emissions from carbon fuels used in aircraft engines for aircraft manufactured or in-production on or after January 1, 2028. This will bring about a change in future aircraft engine designs and approvals and eventually require replacement of engines in future years.
Our Strategic Outlook We have looked to take advantage of our opportunities by elevating the following priorities: Difficult to Replicate Platform The investments we have made since our inception in our brand, fleet, service and technology, including through our recent acquisitions, have advanced our development of a comprehensive platform that we believe would take years and significant investment of capital to replicate in its scale and breadth of offering.
The investments we have made since our inception in our brand, aircraft fleet, service offerings, sales network and technology, including through acquisitions, have advanced our development of a comprehensive platform that we believe would take years and significant investment of capital to replicate in its scale and breadth of offering.
Government Regulation We are subject to government regulation at local, state, federal and international levels. The scope of these regulations is exceedingly broad, covering a wide range of subjects that includes, but is not limited to, those summarized below. Principal Domestic Regulatory Authorities The following paragraphs summarize the roles of some of the most prominent domestic regulators of our business.
Government Regulation We are subject to government regulation at local, state, federal and international levels. The scope of these regulations is exceedingly broad, covering a wide range of subjects that includes, but is not limited to, those summarized below.
Environmental We are committed to reducing the environmental impact of our fleets, as well as the long-term effects of our overall operations. Over time, we expect to offset the carbon impact of our flight operations through the purchase and retirement of applicable carbon credits or via another established and vetted mechanism.
Over time, we expect to offset the carbon impact of our flight operations through the purchase and retirement of applicable carbon credits or via another established and vetted mechanism.
A key component of our SMS is the Aviation Safety Action Program (“ASAP”). ASAP is a non-punitive safety program that enables employees such as pilots, maintenance technicians and dispatchers to report safety related events for review by Wheels Up and the FAA with the purpose of implementing corrective actions.
ASAP is a non-punitive safety program that enables employees such as pilots, maintenance technicians and dispatchers to report safety related events for review by Wheels Up and the FAA with the purpose of implementing corrective actions. Additional non-punitive safety reporting programs are in place for employees that are not covered by the ASAP.
For trips that are charged based on a capped hourly rate, the cost of the trip is calculated by multiplying the applicable capped hourly rate (based on cabin class) by the estimated flight and taxi time with minimum flight hours for each cabin class. Connect Membership Our Connect membership is our lowest cost membership tier.
For trips that are charged based on a capped or fixed rate, the cost of the trip is calculated by multiplying the applicable capped or fixed rate (based on cabin class and rules associated with the applicable Prepaid Block) by the estimated flight and taxi time with minimum flight hours for each cabin class, and adding applicable fees and taxes.
Structure Wheels Up is a holding company with no direct operations. Wheels Up conducts its business through its direct subsidiary, WUP, and WUP’s operating subsidiaries, including, among others, WUPJ, Gama and Mountain Aviation, each of which holds a Part 135 certificate, as well as WUP LLC and Avianis Systems LLC.
Wheels Up conducts its business through its direct subsidiary, WUP Holdings, and WUP Holdings’ operating subsidiaries, including, among others, Mountain Aviation, WUPJ and WUP LLC, each of which holds a Part 135 certificate.
Member Experience solicits and aggregates feedback from members to share across the organization to ensure all teams are keeping a central focus on our members. Working cross-functionally with Sales, Finance, Product, Ops and Member Services, member experience is tasked with monitoring member engagement and ensuring high member satisfaction and low churn.
Our member experience team is tasked with monitoring member engagement and driving an exceptional experience. Our member experience team solicits and aggregates feedback from members to share across the organization to ensure all teams are keeping a central focus on our members.
Our goal is to maximize the impact of the Wheels Up team by attracting, engaging, and retaining the most talented, dedicated and passionate people in the marketplace.
Our goal is to maximize the impact of the Wheels Up team by attracting, engaging, and retaining the most talented, dedicated and passionate people in the marketplace. We have developed our DEI “Guiding Principles” to help ensure alignment across our internal and external programs/processes.
It still is subject to change based on domestic and international laws and standards intended to address global environmental issues, making it impossible to say how such developments might impact our business in the future. The vast majority of airports where we fly are owned and operated by state and local government entities.
This area of regulation is not yet settled. It still is subject to change based on domestic and international laws and standards intended to address global environmental issues, making it impossible to say how such developments might impact our business in the future.
We have seen this relationship drive significant value through certain strategic initiatives, such as offering Delta Medallion status and SkyMiles to Wheels Up members, co-marketing to top Delta customers and collaboration across Wheels Up and Delta Corporate Sales teams.
We also extended the primary term of the CCA to September 20, 2029 . Our relationship with Delta has driven significant opportunities 8 to drive value through certain strategic initiatives, such as offering Delta SkyMiles® and Delta Medallion® status to Wheels Up members, co-marketing to top Delta customers and collaboration across Wheels Up and Delta corporate sales teams.
The Member Operations team is primarily responsible for managing all non-flight aspects of a member’s or customer’s flight experience, including booking, special flight arrangements or services, destination transportation and post-flight follow-ups.
The operations team is primarily responsible for managing all non-flight aspects of a member’s or customer’s flight experience, including booking, special flight arrangements or services, destination transportation and post-flight follow-ups. We began operating the Atlanta Member Operations Center in May 2023, which centralized our critical functions with the goal of better serving our members and customers.
Human Capital Resources Employees As of December 31, 2022, Wheels Up and its affiliates had 3,111 employees, including 3,005 full-time employees, and 106 part-time employees. We employ approximately 1,000 pilots across our aircraft fleet. Approximately 87% of our employees are based in the U.S. and the remaining approximately 13% in Europe and 17 other territories.
Human Capital Employees As of December 31, 2023, Wheels Up and its consolidated subsidiaries had 2,206 employees, including 2,116 full-time employees, and 90 part-time employees. We employ approximately 600 pilots across our aircraft fleet. Approximately 80% of our employees are based in the U.S., with the remaining employees in Europe and other territories.
In this capacity, our account management team plays a critical role in driving membership renewals and the purchase of Prepaid Blocks. This team also assists members in activating their Delta and other partner benefits.
Account managers serve as dedicated private aviation consultants for members with respect to evaluating options for specific flights and their overall Wheels Up relationship. In this capacity, our account management team plays a critical role in driving membership renewals and the purchase of Prepaid Blocks. This team also assists members in activating Delta and other partner benefits.
Excluded from these actions were key operationally focused employee groups such as pilots, maintenance and operations-support personnel. Our Commitment to Diversity, Equity and Inclusion Our success requires the inclusion of ALL — we strive to empower, engage, and celebrate diversity, authenticity and inclusion of all genders, sexual orientations, races, ethnicities, religions, and other identities and cultures.
Our Commitment to Diversity, Equity and Inclusion (“DEI”) Our success requires the inclusion of ALL — we strive to empower, engage, and celebrate diversity, authenticity and inclusion of all genders, sexual orientations, races, ethnicities, religions, and other identities and cultures.
Each aircraft is active in our fleet and flying members daily and serves as a flying symbol of awareness for a specific cause and Wheels Up’s commitment to being a force for good in the communities where we live and work.
Each aircraft is active in our fleet and flying members daily and serves as a flying symbol of awareness for a specific cause and Wheels Up’s commitment to being a force for good in the communities where we live and work. 16 Meals Up Partnership with Feeding America Our Meals Up initiative was created in partnership with Feeding America to help combat the growing levels of food insecurity in the U.S. during the COVID-19 pandemic.
Wheels Up’s corporate headquarters is located at 601 West 26th Street, Suite 900, New York, New York 10001, our telephone number is (212) 257-5252 and our internet address is www.wheelsup.com . The information on, or that can be accessed through, Wheels Up’s website is not part of this Annual Report.
Information About the Company Wheels Up’s corporate headquarters is located at 2135 American Way, Chamblee, Georgia 30080. Our telephone number is (212) 257-5252 and our internet address is www.wheelsup.com . The information on, or that can be accessed through, Wheels Up’s website is not part of this Annual Report. The website address is included as an inactive textual reference only.
We view compliance with Federal Aviation Administration (“FAA”) regulations as a minimum baseline for our commitment to safety. We go beyond FAA minimum requirements by setting higher safety standards in areas of pilot experience, certification (licensing), training, safety programs and many others. Wheels Up has implemented Safety Management Systems (“SMS”), that go beyond FAA regulatory requirements, across our operating certificates.
This begins with our uncompromising commitment to safety as our core value. Safety is a cornerstone of our culture. We view compliance with FAA regulations as a minimum baseline for our commitment to safety. We go beyond FAA minimum requirements by setting higher safety standards in areas of pilot experience, certification (licensing), training, safety programs and many others.
Corporate History and Structure Corporate History Wheels Up was formed on July 1, 2013. On July 13, 2021 (the “Closing Date”), Wheels Up Partners Holdings LLC, a Delaware limited liability company (“WUP”), consummated a business combination (the “Business Combination”) with Aspirational Consumer Lifestyle Corp. (“Aspirational”), a blank check company.
On July 13, 2021 (the “Business Combination Closing Date”), Wheels Up Partners Holdings LLC, a Delaware limited liability company (“WUP Holdings”), consummated a business combination with Aspirational Consumer Lifestyle Corp. (“Aspirational”), a New York Stock Exchange (“NYSE”) listed blank check company.
A Prepaid Block is a pre-purchased amount of dollar-denominated credits that can be applied to future costs incurred by 8 members, including flight services, annual dues, and other incidental costs such as catering and ground transportation. We offer a similar pre-payment option to our Connect members.
Prepayment for Flights — Prepaid Block Programs Core members and UP for Business members can prepay for future flights with the purchase of a Prepaid Block, which are pre-purchased dollar-denominated credits that can be applied to future costs incurred by members, including flight services, annual dues, and other incidental costs such as catering and ground transportation.
Our operations, including flight revenue, are typically favorably affected by increased utilization of our aircraft in the summer months and close in time to major U.S. holidays. Operations Flight Operations Our flight operations teams operate nationwide and are primarily responsible for providing services necessary to facilitate flight activity for our 1P Fleet and 2P Fleet.
Our operations, including flight revenue, are typically favorably affected by increased utilization of our aircraft in the summer months and close in time to major U.S. holidays. Fuel Our operations are impacted by changes in the price and availability of aircraft fuel.
Aspirational Lifestyle Brand We have built an industry-leading brand that creates broad consumer awareness, attracts new customers and allows us to generate deep engagement with our current members and non-member flyers. Our marketing strategy utilizes a variety of owned, earned and paid media channels.
We continue to explore additional commercial and strategic partnerships with Delta to provide our members and customers with additional premium travel experiences. Aspirational Lifestyle Brand We have built an industry-leading brand that creates broad consumer awareness, attracts new members and customers, and allows us to generate deep engagement with our current and prospective members and non-member flyers.
The UP FMS system facilitates fleet optimization and allows third party owners and operators to access Wheels Up demand. We expect UP FMS to attract more aircraft owners and operators to our marketplace, which we anticipate will drive additional benefits through fleet optimization and “Asset-Right” aircraft availability.
We are also actively working to enhance UP FMS and the Wheels Up mobile app and website to attract more members, customers and operators to our marketplace, which we anticipate will drive additional benefits through fleet optimization and “asset-right” aircraft availability.
These agreements provide training availability to Wheels Up throughout the year for both initial and recurrent pilot training in exchange for a fixed price per training slot. We recently took action to secure additional, nationwide training resources and aircraft simulator availability for our pilots.
We have entered into agreements with multiple industry leading third-party suppliers to provide factory-authorized training for our pilots. These agreements provide training availability to Wheels Up throughout the year for both initial and recurrent pilot training in exchange for a fixed price per training slot.
We attempt to target our marketing to consumers who have reasonably predictable demographic or lifestyle attributes similar to those of our current members that are indicative of potential or current private flyers. We utilize targeted, digital marketing to reach new customers and drive awareness.
We attempt to target our marketing to consumers who have reasonably predictable demographic or lifestyle attributes similar to those of our current members that are indicative of potential or current private flyers. We believe our investments in certain marketing opportunities provide high visibility and enable us to connect our brand to programs and events popular with our target customers.
Wheels Up provides its members with a lifestyle program that enhances the member experience beyond our core aviation offerings. Our events include celebrations around popular sports and cultural events, as well as more intimate gatherings hosted by our Wheels Up Ambassadors.
Wheels Up provides its members with a lifestyle program that enhances the member experience beyond our core aviation offerings. Our events include celebrations around popular sports and cultural events. Partnerships with certain of the world’s top lifestyle brands provide our members with benefits and special offers in the areas of fashion, travel, leisure, fitness and more.
Prepaid Blocks afford members with preferential terms and conditions that may include greater aircraft availability, access across cabin class categories, extended capped rate price protection and other member benefits such as Delta Medallion ® status.
Prepaid Blocks afford members with preferential terms and conditions that may include greater aircraft availability, access across cabin class categories, extended capped or fixed rate price protection and other member benefits. In certain years, we have generally experienced greater purchases of Prepaid Blocks from our members during the third and fourth quarters of the calendar year.
Upon consummation of the Business Combination, WUP became a wholly owned subsidiary of Wheels Up Experience Inc., and beginning July 14, 2021, our shares of Class A common stock, par value $0.0001 per share (“Class A common stock”) traded on the New York Stock Exchange under the ticker symbol “UP” and our warrants traded on the New York Stock Exchange under the symbol “UP WS”.
Upon consummation of such business combination, WUP Holdings became a wholly owned subsidiary of Wheels Up Experience Inc., and beginning July 14, 2021, our shares of Common Stock began trading on the NYSE under the ticker symbol “UP”. Wheels Up is a holding company with no direct operations.
Our flight operations team includes certain flight scheduling and member services personnel either located on-site at certain airport locations or at our office locations. We believe that our dynamic flight operations team is vital to providing smooth experiences for our members and customers, and to ensure safe operation of our flights.
We believe that our experienced operations team is vital to providing smooth experiences for our members and customers, and to ensuring safe operation of our flights. Our operations team is integral to our ability to provide flight services to our members and customers.
We generally require our employees and consultants to enter into confidentiality agreements, and certain third parties to enter into non-disclosure agreements. We regularly review our technology development efforts and branding strategy to identify and assess the protection of new intellectual property. We own certain trademarks important to our business, such as the “Wheels Up” word and design marks.
We own certain trademarks important to our business, such as the “Wheels Up” and “Air Partner” words and design marks. In addition, we currently own certain domain names, including “wheelsup.com” and “airpartner.com”. We generally require our employees and consultants to enter into confidentiality agreements, and certain third parties to enter into non-disclosure agreements.
The total purchase price for Air Partner was $108.2 million, which was paid in cash. We believe that strategically expanding our operations, whether through the purchases of aircraft or existing operating businesses with similar characteristics, creates economies of scale and allows us to develop more attractive product and service offerings for our members and customers.
Historically, we expanded our operations through strategic aircraft leasing activity and the purchases of aircraft and existing operating businesses with similar characteristics to create economies of scale and allow us to develop more attractive product and service offerings for our members and customers.
The Connect membership offers variable dynamic pricing on a per trip basis, flight products designed for lower pricing and more flexibility in their schedule, and want to participate in an enhanced lifestyle program of events, experiences and member benefits.
The Connect membership offers members variable dynamic pricing on a per trip basis and benefits flyers with more flexibility in their schedule.
Air Carrier Operations Wheels Up currently provides its passenger air carrier services through five Part 135 certificates across our consolidated subsidiaries. Gama Aviation LLC (“Gama”) is a Part 135 operator.
Operations Air Carrier Operations Wheels Up currently provides its passenger air carrier services through three FAA Part 135 (as defined below) operating certificates across our consolidated subsidiaries: • Mountain Aviation, LLC (“Mountain Aviation”) has a primary operating base at Rocky Mountain Metropolitan Airport.
See “Principal Domestic Regulatory Authorities” for additional information on our Part 135 certificate operations. Member Operations Our Member Operations team is integral to our ability to provide flight services to our members and customers.
See “Principal Domestic Regulatory Authorities” below for additional information on our Part 135 and Part 145 certificate operations. Flight Operations Our operations team operates nationwide and is primarily responsible for providing services necessary to facilitate flight activity for our owned and leased aircraft fleet.
Because we offer products and services that address the needs of most private flyers, we compete with providers across all of the incumbent categories, including whole aircraft purchases, fractional programs, jet card providers and charter brokers. In addition, with respect to aircraft management, we compete with other companies that provide aircraft management services.
The private aviation industry is highly fragmented and we compete with providers across all of the incumbent categories, including whole aircraft purchases, fractional programs, jet card providers and charter brokers.
It operates tech service centers at Cincinnati/Northern Kentucky International Airport (“CVG”) and Fort Lauderdale-Hollywood International Airport, which provide comprehensive MRO facilities and services for aircraft operated by Wheels Up’s consolidated subsidiaries and WUPJ’s aircraft management customers. During 2021, we merged the operations of our subsidiary, Travel Management Company, LLC (“TMC”), with and into WUPJ.
It operates tech service centers at Cincinnati/Northern Kentucky International Airport (“CVG”) and Fort Lauderdale-Hollywood International Airport, which provide comprehensive MRO facilities and services for aircraft operated by Wheels Up’s consolidated subsidiaries. • Wheels Up Partners LLC (“WUP LLC”) is a Part 135 operator providing private aviation charter services and the registered owner of all of our owned aircraft fleet, including Wheels Up branded aircraft.
Each captain is required to hold current FAA Airline Transport Pilot and First-Class Medical Certificates and is required to be FAA Pilot-in-Command Type-Rated in the aircraft they fly. Our pilot selection process screens all candidates for background and safety record. This screening process includes in-person technical interviews and written examinations, as well as a flight simulator assessment if appropriate.
Our pilot selection process screens all candidates for background and safety record. This screening process includes in-person technical interviews and written examinations, as well as a flight simulator assessment if appropriate. Successful candidates must also complete mandatory advanced aircraft ground and flight training in a full-motion simulator. This training is also completed annually.
Safety Each and every day, our passengers trust us with their lives, and it is paramount that we consistently reinforce this trust with our actions and words. This begins with our uncompromising commitment to safety as our core value. Safety is a cornerstone of our culture.
We also bill flyers for a carbon offset fee for each hour of flight time, which are intended to offset the environmental impact from our flight operations. Safety Each and every day, our passengers trust us with their lives, and it is paramount that we consistently reinforce this trust with our actions and words.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe following factors may affect us from period-to-period and may affect our long-term performance: • we may fail to successfully execute our business, marketing and other strategies; • we may experience the detrimental effects of outbreaks of disease or widespread natural disasters that may affect travel behaviors; • we may be unable to attract new customers and/or retain existing members and customers; • our Adjusted Contribution Margin may be negatively impacted by increased flight costs due to aircraft supply constraints combined with our guaranteed rate pricing and fixed purchases of Prepaid Blocks; • our ability to grow complementary products and service offerings may be limited or we may be unable to realize the potential benefits from our technological developments, which could negatively impact our growth rate and financial performance; • we may be impacted by changes in consumer preferences, perceptions, spending patterns and demographic trends, as well as changes in customer creditworthiness that could result in increases in allowance for credit losses or write-offs of receivables that may be uncollectible; • we may require additional capital to finance strategic investments and operations, pursue business objectives and respond to business opportunities, challenges or unforeseen circumstances, and we cannot be sure that additional financing will be available on attractive terms or at all; • our historical growth rates may not be reflective of our future growth; • our business and operating results may be significantly impacted by actual or potential changes to the international, national, regional and local economic, business and financial conditions, including due to inflation, higher interest rates and geopolitical conditions, the health of the U.S. aviation industry and risks associated with our aviation assets; • litigation or investigations involving us could result in material settlements, fines or penalties and may adversely affect our business, financial condition and results of operations; • existing or new adverse regulations or interpretations thereof applicable to our industry may restrict our ability to expand or to operate our business as we wish and may expose us to fines and other penalties; • the occurrence of geopolitical events such as war, terrorism, civil unrest, political instability, environmental or climatic factors, natural disaster, pandemic or epidemic outbreak, public health crisis and general economic conditions may have an adverse effect on our business; • some of our potential losses may not be covered by insurance, and we may be unable to obtain or maintain adequate insurance coverage; and 21 • we are potentially subject to taxation-related risks in multiple jurisdictions, and changes in tax laws could have a material adverse effect on our business, cash flow, results of operations or financial condition.
Biggest changeWe caution you that period-to-period comparisons of our operating results may not be a good indicator of our future growth potential or long-term performance, which may be significantly impacted by the following: • our ability to successfully execute our business, marketing and other strategies; • we may be unable to attract new customers and/or retain existing members and customers; 19 • we may be impacted by changes in consumer preferences, perceptions, spending patterns and demographic trends, as well as changes in customer creditworthiness that could result in increases in allowance for credit losses or write-offs of receivables that may be uncollectible; • our Adjusted Contribution Margin may be adversely impacted by increased flight costs due to aircraft supply constraints or inflation, as well as guaranteed rate pricing arrangements and fixed purchases of Prepaid Blocks associated with current or former member programs; • our ability to grow complementary products and service offerings may be limited or we may be unable to realize the potential benefits from our technological developments, which could adversely impact our growth rate and financial performance; • our business and operating results may be significantly impacted by actual or potential changes to the international, national, regional and local economic, business and financial conditions, including due to inflation, higher interest rates and geopolitical conditions, the health of the U.S. aviation industry and risks associated with our aviation assets; • we may require additional capital to finance strategic investments and operations, pursue business objectives and respond to business opportunities, challenges or unforeseen circumstances, and we cannot be sure that additional financing will be available on attractive terms or at all; • litigation or investigations involving us could result in material settlements, fines or penalties and may adversely affect our business, financial condition and results of operations; • existing or new regulations or interpretations thereof applicable to our industry may restrict our ability to expand or to operate our business as we wish and may expose us to fines and other penalties; • the occurrence of geopolitical events, such as war, terrorism, civil unrest, political instability, environmental or climatic factors, natural disaster, pandemic or epidemic outbreak, public health crisis and general economic conditions, or natural disasters may have an adverse effect on our business; • some of our potential losses may not be covered by insurance, and we may be unable to obtain or maintain adequate insurance coverage; and • we are potentially subject to taxation-related risks in multiple jurisdictions, and changes in tax laws could have a material adverse effect on our business, cash flow, results of operations or financial condition.
If we do not adequately protect our intellectual property, our brand and reputation may be adversely affected and our ability to compete effectively may be impaired. We protect our intellectual property through a combination of trademark, copyright, and trade secret laws, contracts and policies. Our efforts may not be sufficient or effective.
If we do not adequately protect our intellectual property, our brand and reputation may be adversely affected and our ability to compete effectively may be impaired. Our efforts to protect our intellectual property through a combination of trademark, copyright, and trade secret laws, contracts and policies may not be sufficient or effective.
While we believe we have implemented reasonable backup and disaster recovery plans, we have experienced, and expect that in the future we will experience, interruptions, delays and outages in service and availability from time to time due to a variety of factors, including infrastructure changes, human or software errors, website hosting disruptions, capacity constraints or external factors beyond our control.
While we believe we have implemented reasonable backup and disaster recovery plans, we have experienced, and expect that in the future we will continue to experience, interruptions, delays and outages in service and availability from time to time due to a variety of factors, including infrastructure changes, human or software errors, website hosting disruptions, capacity constraints or external factors beyond our control.
In addition, we have the ability to redeem the outstanding Warrants at any time after they become exercisable and prior to their expiration, at a price of $0.10 per Warrant if, among other things, the Reference Value equals or exceeds $10.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a Warrant).
In addition, we have the ability to redeem the outstanding Warrants at any time after they become exercisable and prior to their expiration, at a price of $0.10 per Warrant if, among other things, the Reference Value equals or exceeds $100.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a Warrant).
Our ability to provide effective and timely support is largely dependent on our ability to attract and retain skilled employees who can support our customers and are sufficiently knowledgeable about our product and services. As we continue to grow our business and improve our platform, we will face challenges related to providing quality support at an increased scale.
Our ability to provide effective and timely support is largely dependent on our ability to attract and retain skilled employees who can support our members and customers and are sufficiently knowledgeable about our product and services. As we continue to grow our business and improve our platform, we will face challenges related to providing quality support at an increased scale.
Any failure to offer high-quality customer support may harm our relationships with our customers and could adversely affect our reputation, brand, business, financial condition and results of operations. Through our marketing, advertising, and communications with our customers, we set the tone for our brand as aspirational but also within reach.
Any failure to offer high-quality customer support may harm our relationships with our customers and members and could adversely affect our reputation, brand, business, financial condition and results of operations. Through our marketing, advertising, and communications with our customers, we set the tone for our brand as aspirational but also within reach.
Our intellectual property includes our trademarks, domain names, website, mobile and web applications, software (including our proprietary algorithms and data analytics engines), copyrights, trade secrets and inventions (whether or not patentable). We believe that our intellectual property plays an important role in protecting our brand and the competitiveness of our business.
Our intellectual property includes our trademarks, domain names, website, mobile and web applications, software (including our proprietary algorithms and data analytics engines), copyrights, trade secrets and inventions 30 (whether or not patentable). We believe that our intellectual property plays an important role in protecting our brand and the competitiveness of our business.
If and when the Warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. As a result, we may redeem the Warrants as set forth above even if the holders are otherwise unable to exercise the Warrants.
If and when the Warrants become redeemable by us, we may exercise our redemption right even if we 41 are unable to register or qualify the underlying securities for sale under all applicable state securities laws. As a result, we may redeem the Warrants as set forth above even if the holders are otherwise unable to exercise the Warrants.
The GDPR increased covered businesses’ data privacy and security obligations and imposed stringent data privacy and security requirements, including, for example, detailed notices about how such businesses process personal data, the implementation of security measures, mandatory security breach notification requirements, contractual data protection requirements on data processors and limitations on the retention of records of personal data processing activities.
The GDPR increased covered businesses’ data privacy and security obligations and imposed stringent data privacy and security requirements, including, for example, detailed notices about how such businesses process personal data, the implementation of security measures, 33 mandatory security breach notification requirements, contractual data protection requirements on data processors and limitations on the retention of records of personal data processing activities.
Any change in public perception of the private aviation industry due to perceived negative impacts on the environment and climate change may have an adverse impact on the demand for our products, services and reputations, which could adversely affect our business, results of operations and financial condition.
Any change in public perception of the private aviation industry due to perceived adverse impacts on the environment and climate change may have an adverse impact on the demand for our products, services and reputations, which could adversely affect our business, results of operations and financial condition.
We are or may be subject to new or proposed laws and regulations that may have a direct effect (or indirect effect through our third-party specialists or airport facilities at which we operate) on our operations, including related to the environment, climate change and related reporting.
We are or may be subject to new or proposed laws and regulations that may have a direct effect, or indirect effect through our third-party specialists or airport facilities at which we operate, on our operations, 36 including related to the environment, climate change and related reporting.
In January 2023, the FAA experienced an unexpected technical system outage that resulted in all domestic commercial air traffic being temporarily grounded for several hours, which adversely impacted airlines and private aviation industry operators during the duration of the outage.
For example, in January 2023, the FAA experienced an unexpected technical system outage that resulted in all domestic commercial air traffic being temporarily grounded for several hours, which adversely impacted airlines and private aviation industry operators during the duration of the outage.
If we are unable to maintain an acceptable safety record, we may not be able to retain existing customers or attract new customers, which could have a material adverse effect on our business, financial condition and results of operations.
If we are unable to maintain an acceptable safety record, we may not be able to retain existing members and customers or attract new members and customers, which could have a material adverse effect on our business, financial condition and results of operations.
Laws and regulations that curb the use of conventional energy or require the use of renewable fuels or 40 renewable sources of energy, such as sustainable aviation fuel or wind or solar power, could result in a decrease in the availability of hydrocarbon-based fuels for our aircraft or result in higher costs for such fuels.
Laws and regulations that curb the use of conventional energy or require the use of renewable fuels or renewable sources of energy, such as sustainable aviation fuel or wind or solar power, could result in a decrease in the availability of hydrocarbon-based fuels for our aircraft or result in higher costs for such fuels.
Extreme weather, natural disasters and other adverse events could have a material adverse effect on our business, results of operations and financial condition. Adverse weather conditions and natural disasters, such as hurricanes, winter snowstorms or earthquakes, can cause flight cancellations or significant delays.
Extreme weather, natural disasters and other adverse events could have a material adverse effect on our business, results of operations and financial condition. 26 Adverse weather conditions and natural disasters, such as hurricanes, winter snowstorms or earthquakes, can cause flight cancellations or significant delays.
The SEC rules define a material weakness as a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of a registrant’s financial statements will not be prevented or detected on a timely basis.
SEC rules define a material weakness as a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of a registrant’s financial statements will not be prevented or detected on a timely basis.
Union strikes or staff shortages among airport workers or certain pilots of third-party aircraft operators may result in disruptions of our operations and thus could have a material adverse effect on some of our business, results of operations and financial condition.
Union strikes or staff shortages among airport workers or certain pilots of third-party aircraft operators may result in disruptions of our operations and could have a material adverse effect on some of our business, results of operations and financial condition.
We strive to create high levels of customer satisfaction through the experience provided by our team and representatives. The ease and reliability of our offerings, including our ability to provide high-quality customer support, helps us attract and retain customers.
We strive to create high levels of customer satisfaction through the experience provided by our team and representatives. The ease and reliability of our offerings, including our ability to provide high-quality customer support, helps us attract and retain members and customers.
Our business may also be affected if government agencies shut down for any reason or if there is significant automation or another operational disruption, such as those attributed to Air Traffic Control or weather.
Our business may also be affected if government agencies shut down for any reason or if there is significant automation or another operational disruption, such as those attributed to air traffic control or weather conditions.
In addition, governments could pass laws, regulations or taxes that increase the cost of such fuels, thereby decreasing demand for our services and also increasing the costs of our operations by our third-party aircraft operators.
In addition, governments could pass laws, regulations or taxes that increase the cost of such fuels, thereby decreasing demand for our services and also increasing the costs of our operations and the operations of third-party aircraft operators.
The voting rights will be reinstated once the voting rights of the capital stock registered on the Foreign Stock Record does not exceed the Ownership Threshold, not taking into consideration the pro rata reduction. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
The voting rights 43 will be reinstated once the voting rights of the capital stock registered on the Foreign Stock Record does not exceed the Ownership Threshold, not taking into consideration the pro rata reduction. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
If such third-party operators do not perform adequately or terminate their relationships with us, our costs may increase and our business, financial condition and results of operations could be adversely affected.
If such third-party operators do not perform adequately or terminate their relationships with us, our costs may increase and our business, operations, liquidity, financial condition and results of operations could be adversely affected.
In such a case, the holders will be able to exercise their Warrants prior to redemption for a number of shares of Class A common stock determined based on the redemption date and the fair market value of our Class A common stock.
In such a case, the holders will be able to exercise their Warrants prior to redemption for a number of shares of Common Stock determined based on the redemption date and the fair market value of our Common Stock.
Customers depend on our account managers and member services team to resolve any issues relating to our products and services, such as scheduling changes and other updates to trip details and assistance with certain billing matters.
Members and customers depend on our account managers and member services team to resolve any issues relating to our products and services, such as scheduling changes and other updates to trip details and assistance with certain billing matters.
In recent years, governments, customers, suppliers, employees and other of our stakeholders have increasingly focused on climate change, carbon emissions, waste generation and energy use and the public disclosure of such items.
In recent years, governments, members, customers, suppliers, employees and other of our stakeholders have increasingly focused on climate change, carbon emissions, waste generation and energy use and the public disclosure of such items.
To the extent dissatisfaction with our products and services is widespread or not adequately addressed, our brand may be adversely impacted and our ability to attract and retain members may be adversely affected.
To the extent dissatisfaction with our products and services is widespread or not adequately addressed, our brand may be adversely impacted and our ability to attract and retain members and customers may be adversely affected.
As a result of the recurring fair value measurement, our financial statements and results of operations may fluctuate quarterly, based 41 on factors, which are outside of our control.
As a result of the recurring fair value measurement, our financial statements and results of operations may fluctuate quarterly, based on factors, which are outside of our control.
In addition, union activity could result in demands that may increase our operating expenses and adversely affect our business, financial condition, results of operations and competitive position.
In addition, union activity could result in demands that may increase our operating expenses and adversely affect our business, operations, liquidity, financial condition, results of operations and competitive position.
Sales of a substantial number of shares of our Class A common stock in the public market or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our Class A common stock.
Sales of a substantial number of shares of our Common Stock in the public market or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our Common Stock.
Furthermore, we have historically relied on Prepaid Blocks as a source of capital to fund our ongoing operations and indicator of potential future demand.
Furthermore, we have historically relied on Prepaid Blocks as a source of capital to fund our ongoing operations and as an indicator of potential future demand.
We have the ability to redeem the outstanding Warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per Warrant if, among other things, the last reported sale price of a share of Class A common stock for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which we send the notice of redemption to the Warrant holders (the “Reference Value”) equals or exceeds $18.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a Warrant).
We have the ability to redeem the outstanding Warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per Warrant if, among other things, the last reported sale price of a share of Common Stock for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which we send the notice of redemption to the Warrant holders (the “Reference Value”) equals or exceeds $180.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a Warrant).
Such activity may also impact us indirectly by increasing our operating costs. More stringent environmental laws, regulations or enforcement policies, as well as motivation to maintain our reputation with our key stakeholders, could have a material adverse effect on our business, financial condition and results of operations.
Such activity may also impact us indirectly by increasing our operating costs. More stringent environmental laws, regulations or enforcement policies, as well as motivation to adopt environmental initiatives to maintain our reputation with our key stakeholders, could have a material adverse effect on our business, financial condition and results of operations.
See also “― The residual value of our owned aircraft may be less than estimated in our depreciation policies. ” An impairment loss related to our tangible or intangible assets, including goodwill, could have a material adverse effect on our financial condition and operating results.
See also “― The residual value of our owned aircraft may be less than estimated in our depreciation policies. ” An impairment loss related to our tangible or intangible assets, including goodwill, could have a material adverse effect on our financial condition and results of operations.
In the event the estimated residual value of any of our aircraft types is determined to be lower than the residual value assumptions used in our depreciation policies, the applicable aircraft type in our fleet may be impaired and may result in a material reduction in the book value of applicable aircraft types we operate or we may need to prospectively modify our depreciation policies.
If the estimated residual value of any of our aircraft types is determined to be lower than the residual value assumptions used in our depreciation policies, the applicable aircraft type in our fleet may be impaired and may result in a material reduction in the book value of applicable aircraft types we operate or we may need to prospectively modify our depreciation policies.
Any future determination to pay dividends will be at the discretion of our Board and will depend on our financial condition, results of operations, capital requirements, restrictions contained in future agreements and financing instruments, business prospects and such other factors as our Board deems relevant.
Any future determination to pay dividends will be at the discretion of our Board and will depend on our financial condition, results of operations, capital requirements, restrictions contained in current or future agreements and financing instruments, business prospects and such other factors as our Board deems relevant.
Many of the markets in which we operate are competitive as a result of the expansion of existing private aircraft operators, expanding private aircraft ownership and alternatives such as luxury commercial airline service. We compete against a number of private aviation operators with different business models, and local and regional private charter operators.
Many of the markets in which we operate are competitive as a result of the expansion of private aircraft operators, private aircraft ownership and alternatives such as luxury commercial airline service. We compete against a number of private aviation operators with different business models, and local and regional private charter operators.
Moreover, some of our competitors or technology partners may take actions which disrupt the interoperability of our offerings with their own products or 34 services, or exert strong business influence on our ability to, and the terms on which we, operate our platform and provide our products and service offerings to customers.
Moreover, some of our competitors or technology partners may take actions which disrupt the interoperability of our offerings with their own products or services, or exert strong business influence on our ability to, and the terms on which we, operate our platform and provide our products and service offerings to members and customers.
We could incur significant costs to improve the climate resiliency of our infrastructure and otherwise prepare for, respond to, and mitigate such physical effects of climate change. We are not able to accurately predict the materiality of any potential losses or costs associated with the physical effects of climate change.
We could incur significant costs to improve the climate resiliency of our infrastructure and otherwise prepare for, respond to, and mitigate such physical effects of climate change on our operations. We are not able to accurately predict the materiality of any potential losses or costs associated with the physical effects of climate change.
As a result, any general downturn in economic, business and financial conditions which has an adverse effect on our customers’ spending habits could decrease their demand for travel and, to the extent they travel, to increase their use of commercial air carriers or other means considered to be more economical than our products and services.
Any general downturn in economic, business and financial conditions which has an adverse effect on our customers’ spending habits could decrease their demand for travel and, to the extent they travel, to increase their use of commercial air carriers or other means considered to be more economical than our products and services.
Moreover, our proprietary algorithms, data analytics engines, or other software or trade secrets, including UP FMS, may be compromised by third-parties or our employees, which could cause us to lose any competitive advantage we may have from them. 32 In addition, our business is subject to the risk of third-parties infringing our intellectual property.
Moreover, our proprietary algorithms, data analytics engines, or other software or trade secrets, including UP FMS, may be compromised by third-parties or our employees, which could cause us to lose any competitive advantage we may have from them. Our business is subject to the risk of third parties infringing our intellectual property.
An impairment on any of the aircraft types we operate or an increased level of depreciation expense resulting from a change to our depreciation policies could result in a material negative impact to our financial results.
An impairment on any of the aircraft types we operate or an increased level of depreciation expense resulting from a change to our depreciation policies could result in a material adverse impact to our financial results.
If the assumptions used in our assessments are not realized, or such assumptions change due to a change in business or market conditions impacting our forecasts, rises in interest rates that impact our estimate of weighted average cost of capital, or if the trading price of our Class A common stock declines significantly from historical levels, it is possible that an additional impairment charge for tangible or intangible assets, including goodwill, may need to be recorded in the future, including as result of the effects of factors outside our control on our flight schedules and business.
If the assumptions used in our assessments are 23 not realized, or such assumptions change due to a change in business or market conditions impacting our forecasts, rises in interest rates that impact our estimate of weighted average cost of capital, or if the trading price of our Common Stock declines significantly from historical levels, it is possible that an additional impairment charge for tangible or intangible assets, including goodwill, may need to be recorded in the future, including as result of the effects of factors outside our control on our business and operations.
To the extent that our existing insurance carriers are unable or unwilling to provide us with sufficient insurance coverage, and if insurance coverage is not available from another source (for example, a government entity), our insurance costs may increase and may result in our being in breach of regulatory requirements or contractual arrangements requiring that specific insurance be maintained, which may have a material adverse effect on our business, financial condition and results of operations.
To the extent that our existing insurance carriers are unable or unwilling to provide us with sufficient insurance coverage, and if insurance coverage is not available from another source, our insurance costs may increase and may result in our being in breach of regulatory requirements or contractual arrangements requiring that specific insurance be maintained, which may have a material adverse effect on our business, financial condition and results of operations.
T he CCA with Delta contemplates that we will work together with Delta each year to develop an annual joint marketing and communications plan that focuses on revenue and brand goals, influence/ambassador partnerships and co-branded event opportunities, and that Delta and we will provide certain benefits to the other’s customers and share certain data.
T he CCA with Delta contemplates that we will work together with Delta each year to develop an annual joint marketing and communications plan that focuses on revenue and brand goals and co-branded event opportunities, provide certain benefits to the other’s customers and share certain data.
A shortage of pilots would require us to further increase our labor costs, which would result in an increase in our operating expenses and negative impacts to Adjusted Contribution Margin. Such requirements also impact pilot scheduling, work hours and the number of pilots required to be employed for our operations.
A shortage of pilots would 22 require us to further increase our labor costs, which would result in an increase in our operating expenses and adverse impacts to Adjusted Contribution Margin. Such requirements also impact pilot scheduling, work hours and the number of pilots required to be employed for our operations.
In connection with an audit of Wheels Up’s consolidated financial statements for the year ended December 31, 2022, management assessed the effectiveness of our internal control over financial reporting as of December 31, 2022 and identified material weaknesses in our internal controls over financial reporting with respect certain deficiencies in information technology (“IT”) general controls for IT systems and applications that are relevant to the preparation of the consolidated financial statements, and the failure to maintain effective controls over the financial statement close and key business processes.
In connection with an audit of Wheels Up’s consolidated financial statements for the year ended December 31, 2022, management identified material weaknesses in our internal controls over financial reporting with respect certain deficiencies in information technology (“IT”) general controls for IT systems and applications that are relevant to the preparation of the consolidated financial statements, and the failure to maintain effective controls over the financial statement close and key business processes.
Our Bylaws provide that if the number of shares of our capital stock owned or controlled by non-U.S. Citizens exceed 25% of the voting power of our capital stock (the “Ownership Threshold”), the voting rights of the capital stock owned or controlled by non-U.S.
Our By-Laws provide that if the number of shares of our capital stock owned or controlled by non-U.S. Citizens exceed 25% of the voting power of our capital stock (the “Ownership Threshold”), the voting rights of the capital stock owned or controlled by non-U.S.
Citizens and not registered on a separate stock record (the “Foreign Stock Record”) at the time of any vote or action will be suspended. The suspension of voting power will be terminated upon the earlier of (i) the shares are transferred to a U.S. Citizen and (ii) the registration of the shares on the Foreign Stock Record.
Citizens and not registered on a separate stock record (the “Foreign Stock Record”) at the time of any vote or action will be suspended. The suspension of voting power will be terminated upon the earlier of (i) the transfer of the shares to a U.S. Citizen and (ii) the registration of the shares on the Foreign Stock Record.
In addition, certain of our financing agreements are cross-collateralized, such that an event of default or acceleration of indebtedness under one agreement could result in an event of default under other financing agreements.
In addition, certain of our debt obligations are cross-collateralized, such that an event of default or acceleration of indebtedness under one agreement could result in an event of default under other financing agreements.
These provisions could also limit the price that investors might be willing to pay for shares of our Class A common stock, and therefore depress the trading price of our Class A common stock.
These provisions could also limit the price that investors might be willing to pay for shares of our Common Stock, and therefore depress the trading price of our Common Stock.
In addition, any aircraft accident or incident, whether involving us or other private aircraft operators, could also affect the public’s view of industry safety, which may reduce the amount of trust by our customers. We incur considerable costs to maintain the quality of (i) our safety program, (ii) our training programs and (iii) our fleet of aircraft.
In addition, any aircraft accident or incident, whether involving us or other private aircraft operators, could also affect the public’s view of industry safety, which may reduce the amount of trust by our customers. 27 We incur considerable costs to maintain the quality of our safety program, training programs and fleet of aircraft.
Future resales of our Class A common stock may cause the market price of our securities to drop significantly, even if our business is doing well.
Future resales of our Common Stock may cause the market price of our securities to drop significantly, even if our business is doing well.
If maintenance is not performed properly this may lead to significant damage to aircraft, loss of life, negative publicity and legal claims against us, each of which could have an adverse impact on our business, results of operations, cash flows, financial condition and liquidity.
If maintenance is not performed 25 properly this may lead to significant damage to aircraft, injury or loss of life, adverse publicity and legal claims against us, each of which could have an adverse impact on our business, results of operations, cash flows, financial condition and liquidity.
Any general reduction in passenger traffic could have a material adverse effect on our business, results of operations and financial condition. We are subject to risks associated with climate change, including the potential increased impacts of severe weather events on our operations and infrastructure .
Any general reduction in flight volumes could have a material adverse effect on our business, results of operations and financial condition. We are subject to risks associated with climate change, including the potential increased impacts of severe weather events on our operations and infrastructure .
The provisions of our Certificate of Incorporation requiring exclusive forum in the Court of Chancery of the State of Delaware for certain types of lawsuits may have the effect of discouraging certain lawsuits, including derivative lawsuits and lawsuits against our directors and officers, by limiting plaintiffs’ ability to bring a claim in a judicial forum that they find favorable.
The provisions of our Certificate of Incorporation requiring exclusive forum for certain types of lawsuits may have the effect of discouraging certain lawsuits, including derivative lawsuits and lawsuits against our directors and officers, by limiting plaintiffs’ ability to bring a claim in a judicial forum that they find favorable.
With respect to our planned expansion into additional markets, we will also need to establish our brand and to the extent we are not successful, our business in new markets would be adversely impacted.
With respect to our expansion into additional markets, if any, we will also need to establish our brand and to the extent we are not successful, our business in new markets would be adversely impacted.
The New York Stock Exchange (“NYSE”) may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions. The NYSE has established certain standards for the continued listing of a security on the NYSE.
The NYSE may delist our Common Stock from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions. The NYSE has established certain standards for the continued listing of a security on the NYSE.
Our reliance on third-party operators and our inability to fully control any operational difficulties or increased costs with our third-party operators could have a material adverse effect on the portion of our business where we use third-party operators, financial condition and results of operations.
Our reliance on third-party operators and our inability to fully control any operational difficulties or increased costs with our third-party 29 operators could have a material adverse effect on the portion of our business where we use third-party operators, as well as our liquidity, financial condition and results of operations.
Any of these events could adversely affect business, financial condition and results of operations. Because we use software to collect and store personal information, privacy concerns in the territories in which we operate could result in additional costs and liabilities to us or inhibit sales of our software offering.
Any of these events could adversely affect our business, financial condition and results of operations. Because we use software to collect and store personal information, privacy concerns in the territories in which we operate could result in additional costs and liabilities to us.
Such changes could negatively impact our cash flows from operations, unexpectedly accelerate our liquidity needs and require us to seek alternate sources of capital, including debt financings, which may not be available or on acceptable terms.
Such changes could adversely impact our cash flows from operations, unexpectedly accelerate our liquidity needs and require us to seek alternate sources of capital, including debt financings, which may not be available on acceptable terms or at all.
Our Certificate of Incorporation provides that, to the fullest extent permitted by law, and unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, in the event that such court does not have jurisdiction, the federal district court for the District of Delaware or other state courts of the State of Delaware) will be the sole and exclusive forum for any claims made by any stockholder (including a beneficial owner) for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee to us or our stockholders, (iii) any 48 action asserting a claim against us, our directors, officers or employees arising pursuant to any provision of the DGCL or our Bylaws or our Certificate of Incorporation (as either may be amended from time to time), (iv) any action asserting a claim against us, our directors, officers or employees governed by the internal affairs doctrine or (v) any action asserting an “internal corporate claim” as that term is defined in Section 115 of the DGCL.
Our Certificate of Incorporation provides that, to the fullest extent permitted by law, and unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if that such court does not have jurisdiction, the federal district court for the District of Delaware or other state courts of the State of Delaware) will be the sole and exclusive forum for any claims made by any stockholder (including a beneficial owner) for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee to us or our stockholders, (iii) any action asserting a claim against us, our directors, officers or employees arising pursuant to any provision of the DGCL or Organizational Documents, (iv) any action asserting a claim against us, our directors, officers or employees governed by the internal affairs doctrine or (v) any action asserting an “internal corporate claim” as that term is defined in Section 115 of the DGCL.
The operation of aircraft is subject to various risks, including catastrophic disasters, crashes, mechanical failures and collisions, which may result in loss of life, personal injury and/or damage to property and equipment. We may experience accidents in the future.
The operation of aircraft is subject to various risks, including catastrophic disasters, crashes, mechanical failures and collisions, which may result in loss of life, personal injury and/or damage to property and equipment. We, or other participants in the aviation industry, may experience accidents in the future.
In order to operate our business, achieve our goals, and remain competitive, we continuously seek to identify and devise, invest in, implement and pursue technology, business and other important initiatives, such as those relating to aircraft fleet structuring, UP FMS, business processes, information technology, initiatives seeking to ensure high quality service experience and others.
In order to operate our business, achieve our goals, and remain competitive, we continuously seek to identify and devise, invest in, implement and pursue technology, business and other important initiatives, such as those relating to aircraft fleet structuring, UP FMS, the Wheels Up mobile app, business processes, information technology, and other initiatives seeking to ensure high quality service experience.
If we fail to comply with such covenants, if any other events of default occur for which no waiver or amendment is obtained, or if we are unable to timely refinance the debt obligations subject to such covenants or take other mitigating actions, the holders of our indebtedness could, among other things, declare outstanding amounts immediately due and payable and, subject to the terms of relevant financing agreements, repossess or foreclose on collateral, including certain of our aircraft or other assets used in our business.
If we fail to comply with such covenants, if any other events of default occur for which no amendment, consent or waiver is timely obtained, or if we are unable to timely refinance the debt obligations subject to such covenants or take other mitigating actions, the holders of our indebtedness could, among other things, declare all outstanding amounts and any premiums or penalties immediately due and payable and, subject to the terms of relevant financing agreements, repossess or foreclose on collateral, including certain of our aircraft, the equity interests of the Company’s subsidiaries or other assets used in our business.
In addition, if we fail to meet our obligations or are otherwise in default under the Program Agreements, our access to aircraft engines and parts may become limited and we may experience adverse consequences under the agreements governing our indebtedness, each of which could adversely impact our business, operations, cash flow, financial condition and liquidity.
In addition, if we fail to meet our obligations or are otherwise in default under the Program Agreements with Pratt & Whitney and Rolls-Royce, our access to aircraft engines and parts may become limited and we may experience adverse consequences under the agreements governing our indebtedness, each of which could adversely impact our business, operations, cash flow, liquidity, and 24 financial condition .
The value received upon exercise of the Warrants (1) may be less than the value the holders would have received if they had exercised their Warrants at a later time where the underlying share price is higher and (2) may not compensate the holders for the value of the Warrants, including because the number of ordinary shares received is capped at 0.361 Class A common stock per Warrant (subject to adjustment) irrespective of the remaining life of the Warrants.
The value received upon exercise of the Warrants (i) may be less than the value the holders would have received if they had exercised their Warrants at a later time where the underlying share price is higher and (ii) may not compensate the holders for the value of the Warrants, including because the number of ordinary shares received is capped at 0.0361 Common Stock per Warrant, subject to adjustment, irrespective of the remaining life of the Warrants.
We are exposed to operational disruptions due to maintenance. Our fleet requires regular maintenance work, which may cause operational disruption. Our inability to perform timely maintenance and repairs can result in our aircraft being underutilized which could have an adverse impact on our business, financial condition and results of operations.
Our aircraft fleet requires regular maintenance work, which may cause operational disruption. Our inability to perform timely maintenance and repairs can result in our aircraft being underutilized which could have an adverse impact on our business, financial condition and results of operations.
Redemption of the outstanding Warrants as described above could force holders to: (1) exercise Warrants and pay the exercise price therefor at a time when it may be disadvantageous for the holders to do so; (2) sell Warrants at the then-current market price when the holders might otherwise wish to hold Warrants; or (3) accept the nominal redemption price which, at the time the outstanding Warrants are called for redemption, we expect would 42 be substantially less than the market value of the Warrants.
Redemption of the outstanding Warrants as described above could force holders to: (i) exercise Warrants and pay the exercise price therefor at a time when it may be disadvantageous for the holders to do so; (ii) sell Warrants at the then-current market price when the holders might otherwise wish to hold Warrants; or (iii) accept the nominal redemption price which, at the time the outstanding Warrants are called for redemption, we expect would be substantially less than the market value of the Warrants.
Each of the foregoing items could adversely affect our business, results of operations, financial condition, and the market price and volatility of our Class A common stock and Warrants.
Each of the foregoing items could adversely affect our business, results of operations, financial condition, and the market price and volatility of our Common Stock.
A failure in our technology or breaches of the security of our information technology infrastructure may adversely affect our business and financial condition and disrupt our customers’ businesses. The performance and reliability of the technology that we and our third-party operators use is critical to our ability to compete effectively.
A failure in our technology or breaches of the security of our information technology infrastructure may harm our reputation and adversely affect our business and financial condition. The performance and reliability of the technology that we and our third-party operators use is critical to our ability to compete effectively.
However, increased fuel surcharges may adversely affect our member retention, customer flight activity and revenue if a prolonged period of high fuel costs occurs. In addition, potential increased environmental regulations that might require new fuel sources (e.g., sustainable aviation fuel) could lead to increased costs.
However, increased fuel surcharges may adversely affect our member retention, the demand for flight services and revenue if a prolonged period of high fuel costs occurs. In addition, potential increased environmental regulations that might require new fuel sources (e.g., sustainable aviation fuel) could lead to increased costs.
Except in limited circumstances, none of the Private Warrants will be redeemable by us (so long as they are held by Aspirational or its permitted transferees).
Except in limited circumstances, none of the Private Warrants will be redeemable by us (so long as they are held by Aspirational Consumer Lifestyle Corp. (“Aspirational”) or its permitted transferees).
In addition, certain airports that we frequently utilize and certain of our facilities are in locations susceptible to the impacts of storm-related flooding and sea-level rise, which could result in costs and loss of revenue.
In addition, certain airports that we frequently utilize and certain of our facilities are in locations susceptible to the impacts of storm-related flooding, sea-level rise and other climate-related events, which could result in increased costs and loss of revenue in those locations.
In addition, an impairment loss that is based on, 27 among others, changes in business or market conditions impacting our forecasts, the weighted average cost of capital or the market price of our Class A common stock, may adversely impact the perception of the Company held by stockholders, investors, members and customers, which may adversely impact our business, results of operations or financial condition, and the market price and volatility of our Class A common stock and Public Warrants.
In addition, an impairment loss that is based on, among others, changes in business or market conditions impacting our forecasts, the weighted average cost of capital or the market price of our Common Stock, may adversely impact the perception of the Company held by stockholders, investors, members and customers, which may adversely impact our business, liquidity, financial condition and results of operations, and the volatility and trading prices for our Common Stock and Warrants.
Any of the different crafts or classes of our crewmembers could unionize at any time, which would require us to negotiate in good faith with the crew member group’s certified representative concerning a collective bargaining agreement. In addition, we may be subject to disruptions by unions protesting the non-union status of our other crewmembers.
Any of our pilots and crewmembers could unionize at any time, which would require us to negotiate in good faith with the crew member group’s certified representative concerning a collective bargaining agreement. In addition, we may be subject to disruptions by unions protesting the non-union status of our pilots and crewmembers.
From time to time, we consider opportunities to acquire other entities, assets, products or technologies that may enhance our products and service offerings or technology, expand the breadth of our markets or customer base, or advance our business strategies.
We frequently consider opportunities to acquire or merge with other entities, assets, products or technologies that may enhance our products and service offerings or technology, expand the breadth of our markets or customer base, or advance our business strategies.
Our reputation or brand image could be adversely impacted by, among other things, any failure to maintain high ethical, social and environmental sustainability practices for all of our operations and activities, our impact on the environment, public pressure from investors or policy groups to change our policies, such as movements to institute a “living wage,” customer perceptions of our advertising campaigns, sponsorship arrangements or marketing programs, customer perceptions of our use of social media, or customer perceptions of statements made by us, our employees and executives, agents or other third-parties.
Our reputation or brand image could be adversely impacted by, among other things, any failure to maintain high ethical, social and environmental sustainability practices for all of our operations and activities, our impact on the environment, public pressure from investors or policy groups to change our policies, customer perceptions of our advertising campaigns, sponsorship arrangements or marketing programs, customer perceptions of our use of social media, or customer perceptions of statements made by us, our employees and officers, agents or other third-parties.
Any of these events could adversely affect our business, financial condition and results of operations. A delay or failure to identify and devise, invest in and implement certain important technology, business and other initiatives could have a material impact on our business, financial condition and results of operations.
Any of these events could adversely affect our business, financial condition and results of operations. Risks Relating to Technology, Cybersecurity and Data Privacy A delay or failure to identify and devise, invest in and implement certain important technology, business and other initiatives could have a material adverse impact on our business, financial condition and results of operations.
Operational impacts, such as the delay or cancellation of flights, could result in loss of revenue, decrease the demand for our products and services, and harm our reputation.
Operational impacts, such as the delay or cancellation of flights, could result in loss of revenue, decreased demand for our products and services, and reputational harm.
Fuel costs are a key component of our operating expenses. A significant increase in fuel costs may impact flight activity by our members and customers, and otherwise negatively impact our revenue, operating expenses and results of operations, including Adjusted Contribution Margin.
A significant increase in fuel costs may impact flight activity by our members and customers, and otherwise adversely impact our revenue, operating expenses and results of operations, including Adjusted Contribution Margin.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOur aircraft are subject to regular maintenance, inspection and certifications schedules 49 that may result in an aircraft being located at a one of our controlled or third-party maintenance facilities from time-to-time. See “Our Aircraft Fleet” in Part I, Item 1 of this Annual Report for more information about our aircraft fleet as of December 31, 2022.
Biggest changeOur aircraft are subject to regular maintenance, inspection and certifications schedules that may result in an aircraft being located at a one of our controlled or third-party maintenance facilities from time-to-time. 45 Wheels Up Owned and Leased Aircraft As of December 31, 2023, our owned and long-term leased aircraft fleet was as follows: Category Owned Leased Total Large Cabin Jets (1) 0 1 1 Super-Midsize Jets (2) 16 30 46 Midsize Jets (3) 13 6 19 Light Jets (4) 33 22 55 Turboprops (5) 64 0 64 Total 126 59 185 __________________ (1) Consists of one Gulfstream G-IVSP aircraft.
ITEM 2. PROPERTIES Aircraft Assets As of December 31, 2022, we owned and leased certain aircraft utilized in our fleet. As part of our “floating fleet” model, our aircraft do not return to a home base.
ITEM 2. PROPERTIES Aircraft Assets As of December 31, 2023, we owned and leased certain aircraft utilized in our fleet. As part of our “floating fleet” model, our aircraft do not return to a home base.
These leases are generally shorter in duration and permit access from both the air and land sides. In addition, we lease an FBO at CVG. Maintenance Facilities We lease maintenance facilities utilized in our operations across the United States. Our maintenance facilities primarily consist of specialized hangars with equipment and tools necessary to maintain and repair our aircraft.
These leases are generally shorter in duration and permit access from both the air and land sides. In addition, we lease an FBO at CVG. Maintenance Facilities We lease maintenance facilities utilized in our operations across the U.S. Our maintenance facilities primarily consist of specialized hangars with equipment and tools necessary to maintain and repair our aircraft.
Ground Facilities Wheels Up does not currently own any real property. We lease the land and buildings that we occupy, which primarily consist of FBOs, storage hangars, maintenance facilities and office space. FBOs and Storage Hangars We lease aircraft storage hangars utilized in our operations across the United States. Certain hangar leases are accompanied by ramp or ground leases.
We lease the land and buildings that we occupy, which primarily consist of FBOs, storage hangars, maintenance facilities and office space. FBOs and Storage Hangars We lease aircraft storage hangars utilized in our operations at airports across the U.S. Certain hangar leases are accompanied by ramp or ground leases.
We believe this allows us to keep our aircraft positioned to most efficiently address our member flight requests, ensuring broad geographic coverage with the fleet and limiting costly repositioning flights.
We believe this allows us to keep our aircraft positioned to most efficiently address our member flight requests, ensuring broad geographic coverage with the fleet and limiting costly repositioning flights. Lower repositioning costs can provide Wheels Up with a meaningful cost advantage on one-way and multi-city itineraries.
We believe that our existing facilities are in good condition and suitable for the conduct of our business.
We believe that our existing facilities are in good condition and suitable for the conduct of our business; however, we continue to rationalize our real estate portfolio as part of our strategic cost cutting initiatives.
These leases are generally longer in duration and contain a mix of hangars and accompanying office space. Our maintenance facilities also house certain mobile maintenance equipment that we use when responding to maintenance requests on aircraft located away from such facilities. Offices We lease our corporate headquarters located in New York, New York.
Our maintenance facilities also house certain mobile maintenance equipment that we use when responding to maintenance requests on aircraft located away from such facilities. 46 Offices During the first quarter of 2024, we relocated our corporate headquarters to the Atlanta Member Operations Center in Chamblee, Georgia, which is situated nearby DeKalb-Peachtree Airport.
We use this facility for executive management, finance and accounting, legal, human resource management, technology, marketing, sales and other administrative functions. We also have various leases for sales offices or operational functions, primarily located within the United States. Air Partner also leases certain office space outside of the United States.
We also have various leases for sales offices or operational functions, primarily located within the U.S., which generally have shorter lease durations. Air Partner also leases certain office space outside of the U.S., including adjacent to London Gatwick Airport in the U.K.
Removed
Our member services team has leased office space located in the Atlanta, Georgia and Columbus, Ohio areas. We have long-term leases for our corporate office in New York, New York and our new member operations center under construction in the Atlanta, Georgia area, while most leases for our other offices have shorter durations.
Added
(2) Primarily consists of Cessna Citation X aircraft. (3) Primarily consists of Cessna Citation Excel/XLS aircraft. (4) Primarily consists of Cessna CJ3 and Hawker 400XP aircraft. (5) Primarily consists of Textron and Beechcraft King Air 350i twin turboprop aircraft.
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The majority of our owned aircraft fleet are painted in the blue and white Wheels Up livery with the “UP” insignia painted on the tail. We also own certain Textron and Beechcraft King Air 350i aircraft painted in special Wheels Up liveries to support special charitable causes, such as breast cancer awareness (pink), hunger awareness (orange) and veterans’ initiatives (camouflage).
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Third-Party Network Aircraft We have access to approximately 1,500 aircraft in all private aircraft cabin classes through our network of third-party operators. Our third-party aircraft operators must satisfy our rigorous and stringent safety standards for aircraft, crew and operations. To become approved for use, the operator must complete an assessment process to verify compliance with our standards.
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Additionally, we verify compliance with our crew and aircraft standards using a safety database system for every flight. Under the terms of our agreements with approved third-party operators, they provide service to members and non-member flyers subject to continued compliance with our flight standards. Approved operators are subject to recurring assessments.
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We contract with operators to participate in our network for periods ranging from a single flight up to three years with compensation to the operator based on the cabin class or other unique characteristics of the aircraft. Ground Facilities Wheels Up does not currently own any real property.
Added
These leases are generally longer in duration and contain a mix of hangars and accompanying office space.
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We have long-term leases for our corporate headquarters at the Atlanta Member Operations Center and our New York, New York corporate office. We use these facilities for executive management, finance and accounting, legal, human resource management, operations, technology, marketing, sales and other administrative functions.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS From time to time, we are subject to various legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business.
Biggest changeITEM 3. LEGAL PROCEEDINGS From time to time, we are subject to various legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business. The outcome of these matters cannot be predicted with certainty.
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While the outcome of these matters cannot be predicted with certainty, we do not believe that the outcome of any of these matters, individually or in the aggregate, will have a material adverse effect on our financial condition, results of operations or cash flows. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. PART II.
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See Note 1 5 “Commitments and Contingencies” of the Notes to the Financial Statements contained herein for a discussion of loss contingencies, if any. Below is a discussion of our significant pending legal proceedings: GRP Litigation On July 5, 2023, we filed a lawsuit against Exclusive Jets, LLC d/b/a flyExclusive, a subsidiary of flyExclusive, Inc.
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(“FE”), in the United States District Court for the Southern District of New York, which was re-filed against FE in the Supreme Court of the State of New York in New York County on August 23, 2023.
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We instituted the action to enforce our rights and remedies for wrongful termination by FE of that certain Fleet Guaranteed Revenue Program Agreement, dated November 1, 2021, between WUP and FE (the “GRP Agreement”). On June 30, 2023, FE notified us in writing of its immediate termination of the GRP Agreement.
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We believe that FE wrongfully terminated such agreement in breach thereof. We are seeking compensatory damages, including the return of the material deposits held by FE under the GRP Agreement that are recorded in Other non-current assets on our consolidated balance sheets for each of the years ended December 31, 2023 and 2022, as well as attorneys’ fees and costs.
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We intend to vigorously pursue the action to recover the outstanding deposits and other damages from FE, but there can be no assurance as to the outcome of the lawsuit against FE. Our success in recovering the amounts from FE will depend upon several factors including the availability of funds by FE for the recoverable amounts.
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We are in the process of evaluating the effects of the foregoing events and we cannot make a reasonable estimate of any outcome, recovery or loss at this time. See Item 1A. Risk Factors – “ Some of our business is dependent on our third-party operators to provide flights for our members and customers.
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If such third-party operators do not perform adequately or terminate their relationships with us, our costs may increase and our business, operations, liquidity, financial condition, and results of operations could be adversely affected ” for further information. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. PART II.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information 50 Our Class A common stock and Public Warrants have been listed on the NYSE under the symbol “UP” and “UP WS”, respectively, since July 14, 2021.
Biggest changeITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our Common Stock is listed on the NYSE under the symbol “UP”. 47 Holders As of March 4, 2024, there were approximately 118 holders of record of our Common Stock, which does not include beneficial owners holding our securities through nominee names.
We do not anticipate declaring or paying cash dividends on our Class A common stock for the foreseeable future.
Dividends We have not paid any cash dividends on our Common Stock and do not anticipate declaring or paying cash dividends on our Common Stock for the foreseeable future. Unregistered Sales of Equity Securities and Use of Proceeds None. Issuer Purchases of Equity Securities None. ITEM 6. [RESERVED]
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Prior to the closing of the Business Combination on July 13, 2021, our Class A Common stock and Public Warrants were listed on the NYSE under the symbols “ASPL” and “ASPL WS”, respectively. We do not currently intend to list the Private Warrants on any securities exchange.
Removed
Holders As of March 27, 2023, there were approximately 98, one and six holders of record of our Class A common stock, Public Warrants and Private Warrants, respectively. Such numbers do not include beneficial owners holding our securities through nominee names. Dividends We have not paid any cash dividends on our Class A common stock.
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Stock Performance Graph The following graph sets forth the cumulative stockholder return (assuming reinvestment of dividends) to our stockholders from November 13, 2020, the date that Aspirational’s Class A ordinary shares were first quoted on the NYSE, through December 31, 2022, as well as the corresponding returns on the S&P 500 Index, the S&P IT Index, the S&P 500 Airlines Index, the S&P Aerospace & Defense Select Index and the S&P 500 Consumer Discretionary Index.
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The stock performance graph assumes that $100 was invested on November 13, 2020 and assumes reinvestment of dividends. Historical total stockholder return is not necessarily indicative of future results.
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The performance graph above shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Exchange Act or subject to Regulation 14A or 14C, other than as provided by this Item 5, or to the liabilities of Section 18 of the Exchange Act, and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act. 51 Unregistered Sales of Equity Securities and Use of Proceeds None.
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Issuer Purchases of Equity Securities The table below sets forth information regarding purchases of our Class A common stock during the three months ended December 31, 2022: Period Total Number of Shares Purchased (1) Average Price Paid Per Share October 1, 2022 through October 31, 2022 — $ — November 1, 2022 through November 30, 2022 257,830 $ 1.32 December 1, 2022 through December 31, 2022 — $ — Total 257,830 $ 1.32 __________________ (1) Reflects shares withheld for payment of tax liability arising as a result of the vesting of restricted stock for certain officers.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

87 edited+142 added−81 removed56 unchanged
Biggest changeDeferred tax assets are reduced by a valuation allowance to the extent management believes it is not more likely than not to be realized. 62 Results of Our Operations for the Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021 The following table sets forth our results of operations for the years ended December 31, 2022 and 2021 (in thousands, except percentages): Year Ended December 31, Change in 2022 2021 $ % Revenue $ 1,579,760 $ 1,194,259 $ 385,501 32 % Costs and expenses: Cost of revenue 1,540,325 1,117,633 422,692 38 % Technology and development 57,240 33,579 23,661 70 % Sales and marketing 117,110 80,071 37,039 46 % General and administrative 183,531 113,331 70,200 62 % Depreciation and amortization 65,936 54,198 11,738 22 % Gain on sale of aircraft held for sale (4,375) (1,275) (3,100) 243 % Impairment of goodwill 180,000 — 180,000 — % Total costs and expenses 2,139,767 1,397,537 742,230 53 % Loss from operations (560,007) (203,278) (356,729) 175 % Other income (expense): Change in fair value of warrant liability 9,516 17,951 (8,435) (47) % Loss on extinguishment of debt — (2,379) 2,379 (100) % Interest income 3,670 53 3,617 6825 % Interest expense (7,515) (9,519) 2,004 (21) % Other expense, net (1,041) — (1,041) n/a Total other income (expense) 4,630 6,106 (1,476) (24) % Loss before income taxes (555,377) (197,172) (358,205) (182) % Income tax expense (170) (58) (112) 193 % Net loss (555,547) (197,230) (358,317) 182 % Less: net income (loss) attributable to non-controlling interests (387) (7,210) 6,823 (95) % Net loss attributable to Wheels Up Experience Inc. $ (555,160) $ (190,020) $ (365,140) 192 % 63 Revenue Revenue increased by $385.5 million, or 32%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Biggest changeDeferred tax assets are reduced by a valuation allowance to the extent management believes it is not more likely than not to be realized. 61 Results of Our Operations for the Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 The following table sets forth our results of operations for the years ended December 31, 2023 and 2022 (in thousands, except percentages): Year Ended December 31, Change in 2023 2022 $ % Revenue $ 1,253,317 $ 1,579,760 $ (326,443) (20.7) % Costs and expenses: Cost of revenue 1,232,506 1,540,325 (307,819) (20.0) % Technology and development 61,873 57,240 4,633 8.1 % Sales and marketing 88,828 117,110 (28,282) (24.1) % General and administrative 145,873 183,531 (37,658) (20.5) % Depreciation and amortization 58,533 65,936 (7,403) (11.2) % Gain on sale of aircraft held for sale (16,939) (4,375) (12,564) 287.2 % Impairment of goodwill 126,200 180,000 (53,800) (29.9) % Total costs and expenses 1,696,874 2,139,767 (442,893) (20.7) % Loss from operations (443,557) (560,007) 116,450 20.8 % Other income (expense): Change in fair value of warrant liability 739 9,516 (8,777) (92.2) % Loss on divestiture (2,991) — (2,991) n/m Loss on extinguishment of debt (4,401) — (4,401) n/m Interest income 6,121 3,670 2,451 66.8 % Interest expense (41,255) (7,515) (33,740) (449.0) % Other expense, net (660) (1,041) 381 (36.6) % Total other income (expense) (42,447) 4,630 (47,077) (1,016.8) % Loss before income taxes (486,004) (555,377) 69,373 (12.5) % Income tax expense (1,383) (170) (1,213) 713.5 % Net loss (487,387) (555,547) 68,160 12.3 % Less: net income (loss) attributable to non-controlling interests — (387) 387 (100.0) % Net loss attributable to Wheels Up Experience Inc. $ (487,387) $ (555,160) $ 67,773 12.2 % n/m - not meaningful 62 Revenue Revenue decreased by for the year ended December 31, 2023 compared to the year ended December 31, 2022, as follows (in thousands): Year Ended December 31, Change in 2023 2022 $ % Membership $ 82,857 $ 90,132 $ (7,275) (8.1) % Flight 884,065 1,073,094 (189,029) (17.6) % Aircraft management 175,829 242,032 (66,203) (27.4) % Other 110,566 174,502 (63,936) (36.6) % Total $ 1,253,317 $ 1,579,760 $ (326,443) (20.7) % The decrease in membership revenue was driven by a 21% decrease in Active Members year-over-year as a result of the regionalization of our member programs and focus on more profitable flying.
Key Factors Affecting Results of Operations We believe that the following factors have affected our financial condition and results of operations and are expected to continue to have a significant effect: Market Competition We compete for market share in the private aviation industry, which consists of a highly fragmented group of companies providing varying types of services.
Key Factors Affecting Financial Condition and Results of Operations We believe that the following factors have affected our financial condition and results of operations and are expected to continue to have a significant effect: Market Competition We compete for market share in the private aviation industry, which consists of a highly fragmented group of companies providing varying types of services.
Membership revenue is comprised of a one-time initiation fee paid at the commencement of a membership and recurring annual dues. In the first year of membership, a portion of the initiation fee is applied to annual dues.
Membership revenue is comprised of a one-time initiation fee paid at the commencement of membership and recurring annual dues. In the first year of membership, a portion of the initiation fee is applied to annual dues.
We base our estimates and assumptions on our recent 69 performance, our expectations of future performance, economic or market conditions and other assumptions we believe to be reasonable. Actual future results may differ from those estimates. Intangible assets, other than goodwill, acquired in a business combination are recognized at their fair value as of the date of acquisition.
We base our estimates and assumptions on our recent performance, our expectations of future performance, economic or market conditions and other assumptions we believe to be reasonable. Actual future results may differ from those estimates. Intangible assets, other than goodwill, acquired in a business combination are recognized at their fair value as of the date of acquisition.
Revenue Recognition We determine revenue recognition through the following steps in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers : • Identification of the contract, or contracts, with a customer; • Identification of the performance obligations in the contract; • Determination of the transaction price; • Allocation of the transaction price to the performance obligations in the contract; and • Recognition of revenue when, or as, a performance obligation is satisfied.
Revenue Recognition We determine revenue recognition through the following steps in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers : 68 • Identification of the contract, or contracts, with a customer; • Identification of the performance obligations in the contract; • Determination of the transaction price; • Allocation of the transaction price to the performance obligations in the contract; and • Recognition of revenue when, or as, a performance obligation is satisfied.
We use Active Users to assess the adoption of our platform and frequency of transactions, which are key factors in our penetration of the market in which we operate and our growth in revenue. Live Flight Legs We define Live Flight Legs as the number of completed one-way revenue generating flight legs in a given period.
We use Active Users to assess the adoption of our platform and frequency of transactions, which are key factors in our penetration of the market in which we operate and our growth in revenue. 58 Live Flight Legs We define Live Flight Legs as the number of completed one-way revenue generating flight legs in a given period.
However, there are a number of limitations related to the use of these non-GAAP financial measures and their nearest GAAP equivalents, including that they exclude significant expenses that are required by GAAP to be recorded in Wheels Up’s financial measures.
However, there are a number of limitations related to the use of these non-GAAP financial measures and their nearest GAAP equivalents, 54 including that they exclude significant expenses that are required by GAAP to be recorded in Wheels Up’s financial measures.
Sales and Marketing Sales and marketing expense primarily consists of compensation expenses in support of sales and marketing such as commissions, salaries, equity-based compensation and related benefits. Sales and marketing expense also includes expenses associated with advertising, promotions of our services, member experience, account management and brand-building.
Sales and Marketing Sales and marketing expense primarily consists of compensation expenses in support of sales and marketing such as commissions, salaries, equity-based compensation and related benefits. Sales and marketing expense also includes expenses associated with advertising, promotions of our services, member experience, account management and brand marketing.
Assumptions that we make in estimating the fair value of acquired developed technology, trade names, customer relationships and other identifiable intangible assets include future cash flows that we expect to generate from the acquired assets.
Assumptions that we make in estimating the fair value of acquired developed 69 technology, trade names, customer relationships and other identifiable intangible assets include future cash flows that we expect to generate from the acquired assets.
Pilot Availability and Attrition In recent years, we have experienced increased competition for qualified pilots that are eligible for hire due to our more stringent pilot qualifications and flight training standards.
Pilot Availability & Attrition In recent years, we have experienced increased competition for qualified pilots that are eligible for hire due to our stringent pilot qualifications and flight training standards.
We use Active Members 59 to assess the adoption of our premium offerings which is a key factor in our penetration of the market in which we operate and a key driver of membership and flight revenue.
We use Active Members to assess the adoption of our premium offerings which is a key factor in our penetration of the market in which we operate and a key driver of membership and flight revenue.
Recent Accounting Pronouncements For further information on recent accounting pronouncements, see Note 2, Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements included herein.
Recent Accounting Pronouncements For further information on recent accounting pronouncements, see Note 2, Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements included herein. 72
The remainder of the initiation fee, less any flight credits, is deferred and recognized on a straight-line basis over the estimated duration of the customer relationship period, which is currently estimated to be three years as of December 31, 2022. Members are charged recurring annual dues to maintain their membership.
The remainder of the initiation fee, less any flight credits, is deferred and recognized on a straight-line basis over the estimated duration of the customer relationship period, which is currently estimated to be three years as of December 31, 2023. Members are charged recurring annual dues to maintain their membership.
For a discussion of the year ended December 31, 2021 compared to the year ended December 31, 2020, see “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the U.S. Securities and Exchange Commission (“SEC”) on March 10, 2022.
For a discussion of the year ended December 31, 2022 compared to the year ended December 31, 2021, see “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the U.S. Securities and Exchange Commission (“SEC”) on March 31, 2023.
Off-Balance Sheet Arrangements As of December 31, 2022, we were not a party to any off-balance sheet arrangements, as defined in Regulation S-K, that have or are reasonably likely to have a current or future material effect on our financial condition, results of operations or cash flows.
Off-Balance Sheet Arrangements As of December 31, 2023, we were not a party to any off-balance sheet arrangements, as defined in Regulation S-K, that have or are reasonably likely to have a current or future material effect on our financial condition, results of operations or cash flows.
In addition, other revenue includes safety and security revenue, flight management software subscription fees from third-party operators for access to UP FMS, sponsorships and partnership fees, and special missions revenue, including government, defense, emergency and medical transport.
In addition, other revenue includes flight management fees, software subscription fees from third-party operators for access to UP FMS, fees from third-party sponsorships and partnership fees and special missions revenue, including government, defense, emergency and medical transport.
On April 1, 2022, we acquired Air Partner plc (“Air Partner”) and determined that Air Partner represents a new reporting unit for the purposes of assessing potential impairment of goodwill, and therefore the private aviation services operating segment was divided into two reporting units - Air Partner and the legacy Wheels Up reporting unit (“WUP Legacy”).
On April 1, 2022, we acquired Air Partner and determined that Air Partner represents a new reporting unit for the purposes of assessing potential impairment of goodwill, and therefore the private aviation services operating segment was divided into two reporting units - Air Partner and the legacy Wheels Up reporting unit (“WUP Legacy”).
Cost of revenue 60 also consists of compensation expenses, including equity-based compensation and related benefits for employees that directly facilitate flight operations. In addition, cost of revenue includes aircraft owner expenses incurred such as maintenance coordination, cabin crew and pilots, and certain aircraft operating costs such as maintenance, fuel, landing fees and parking.
Cost of revenue also consists of compensation expenses, including equity-based compensation and related benefits, for employees that directly facilitate flight operations. In addition, cost of revenue includes aircraft management expenses incurred such as maintenance coordination, cabin crew and pilots, and certain aircraft operating costs such as maintenance, fuel, landing fees and parking.
Impairment of Goodwill Impairment of goodwill consists of any write off of goodwill during the period. Impairment is recorded when the carrying value of a reporting unit exceeds its fair value as of the impairment assessment date. See Note 2, Summary of Significant Accounting Policies in the of the Notes to Consolidated Financial Statements included herein.
Impairment of Goodwill Impairment of goodwill consists of any write-off of goodwill during the period. An impairment charge is recorded when the carrying value of a reporting unit exceeds its fair value as of the impairment assessment date. See Note 2, Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements included herein.
While a unique consumer can complete multiple revenue generating flights on our platform in a given period, that unique user is counted as only one Active User.
While a unique customer can complete multiple revenue generating flights on our platform in a given period, that unique customer is counted as only one Active User.
Both the Black-Scholes option-pricing model and the Monte Carlo simulation model requires management to include key inputs and assumptions, including the fair value of an underlying common interest in WUP or our current Class A common stock quoted market price, the expected trading volatility over the term of the award, the expected term of the award, risk-free interest rates and expected dividend yield.
Both the Black-Scholes option-pricing model and the Monte Carlo simulation model require management to include key inputs and assumptions, including the fair value of an underlying common interest in WUP or our current Common Stock quoted market price, the expected trading volatility over the term of the award, the expected term of the award, risk-free interest rates and expected dividend yield.
See Note 7, Goodwill and Intangible Assets of the Notes to Consolidated Financial Statements included herein for additional information about impairment testing for goodwill and intangible assets, including the goodwill impairment charges that we recognized during the fiscal year ended December 31, 2022.
See Note 7 , Goodwill and Intangible Assets of the Notes to Consolidated Financial Statements included herein for additional information about impairment testing for goodwill and intangible assets, including the goodwill impairment charges that we recognized during the fiscal years ended December 31, 2022, and 2023.
Our operations, data science and revenue management teams collectively use data and technology to manage our dynamic pricing and drive operational efficiencies. Economic Conditions The private aviation industry is volatile and affected by economic cycles and trends. On-demand flying is typically discretionary for members and customers and may be affected by negative trends in the economy.
Our digital and revenue management teams collectively use data and technology to manage our dynamic pricing and drive operational efficiencies. Economic Conditions & Inflation The private aviation industry is volatile and affected by economic cycles and trends. On-demand flying is typically discretionary for members and customers, and may be affected by negative trends in the economy.
This section generally discusses the results of our operations for the year ended December 31, 2022 compared to the year ended December 31, 2021.
This section generally discusses the results of our operations for the year ended December 31, 2023 compared to the year ended December 31, 2022.
In connection with the Business Combination, we adopted and have issued equity under the Wheels Up Experience Inc. 2021 Long-Term Incentive Plan, which provides for grants of various types of awards including stock options, restricted stock units and other stock-based awards.
In connection with the Business Combination, we adopted the Wheels Up Experience Inc. 2021 Long-Term Incentive Plan, which provides for grants of various types of awards including stock options, restricted stock units and other stock-based awards.
As our common stock accumulates 70 more trading history, we will incorporate more of our own historical volatility and continue to use benchmark volatility with respect to periods beyond our common stock’s trading history. • Expected Term. The expected term represents the period that our equity-based awards are expected to be outstanding.
As our Common Stock accumulates more trading history, we will incorporate more of our own historical volatility and continue to use benchmark volatility with respect to periods beyond our Common Stock’s trading history. • Expected Term. The expected term represents the period that our equity-based awards are expected to be outstanding. • Risk-Free Interest Rate.
Liquidity and Capital Resources Overview Our principal sources of liquidity have historically consisted of financing activities, including proceeds from the Business Combination, and operating activities, primarily from the increase in deferred revenue associated with the sale of Prepaid Blocks.
Liquidity and Capital Resources Overview Our principal sources of liquidity have historically consisted of financing activities, including proceeds from the Business Combination and debt financing transactions, and operating activities, primarily from deferred revenue associated with the sale of Prepaid Blocks.
Active Users We define Active Users as Active Members as of the reporting date plus unique non-member consumers who completed a revenue generating flight at least once in a given period and excluding wholesale flight activity.
Active Users We define Active Users as Active Members as of the reporting date plus unique customers who completed a revenue generating flight at least once in a given period and excluding wholesale flight activity.
Since Wheels Up was not actively traded on the New York Stock Exchange until July 2021, we used the average volatility of a mix of several unrelated publicly traded companies within the airline industry and certain travel technology companies, which we consider to be comparable to our business, over a period equivalent to the expected term of the awards.
Since Wheels Up was not actively traded on the New York Stock Exchange until July 2021, we used the average volatility of a mix of several unrelated publicly traded companies which we consider to be comparable to our business, over a period equivalent to the expected term of the awards.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes to our consolidated financial statements included in Part II, Item 8 of this Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K (“Annual Report”).
Wheels Up has one of the largest and most diverse mix of available aircraft in the industry. As of December 31, 2022, we have 215 aircraft in our owned and leased fleet that includes Turboprops, Light, Midsize, Super-Midsize and Large-Cabin jets.
Wheels Up has one of the largest and most diverse mix of available aircraft in the industry. As of December 31, 2023, we had 185 aircraft in our owned and leased fleet that includes Turboprops, Light, Midsize, Super-Midsize and Large-Cabin jets.
Technology and Development Technology and development expense primarily consists of compensation expenses for engineering, product development and design employees, including equity-based compensation, expenses associated with ongoing improvements to, and maintenance of, our platform offerings and other technology, which are not eligible for capitalization. Technology and development expense also includes software expenses and technology consulting fees.
Technology and Development Technology and development expense primarily consists of compensation expenses for engineering, product development and design employees, including equity-based compensation and related benefits, expenses associated with ongoing improvements to, and maintenance of, our platform offerings and other technology. Technology and development expense also includes software expenses and technology consulting fees.
Fair value of our historical and outstanding equity-based compensation awards, including stock options, WUP profits interests, WUP restricted interests and RSU awards with market-based vesting conditions, were estimated using the Black Scholes option-pricing model and a Monte Carlo simulation model was used to determine the fair value of grants with market conditions.
We account for forfeitures of awards as they occur. Fair value of our historical and outstanding equity-based compensation awards, including stock options, WUP profits interests, and WUP restricted interests were estimated using the Black Scholes option-pricing model. A Monte Carlo simulation model was used to determine the fair value of grants with market conditions.
Interest Income Interest income increased $3.6 million for the year ended December 31, 2022 compared to the year ended December 31, 2021. The increase was attributable to higher rates of interest earned on cash equivalents in money market funds, U.S treasury bills and time deposits.
The increase was attributable to higher rates of interest earned on cash equivalents in money market funds, U.S treasury bills and time deposits. Interest Expense Interest expense increased $33.7 million for the year ended December 31, 2023 compared to the year ended December 31, 2022.
The assumptions we use in the valuation models were based on future expectations combined with management judgment, and considering a number of objective and subjective factors to determine the fair value of WUP common interests as of the date of each WUP stock option grant, including the following: • the nature and history of our business; • the economic outlook in general and the outlook of our industry; • our stage of development and the competitive environment; • our historical and forecasted operating results; • our overall financial position; • the rights and preferences of WUP preferred interests relative to common interests; • the likelihood of achieving a liquidity event, such as an initial public offering or sale based on current conditions; • any adjustment necessary to recognize a discount for lack of marketability; and, • the market performance of comparable publicly-traded companies.
The valuations of WUP common interests were determined in accordance with the guidance provided by the American Institute of Certified Public Accountants Audit and Accounting Practice Series, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. 71 The assumptions we use in the valuation models were based on future expectations combined with management judgment, and considering a number of objective and subjective factors to determine the fair value of WUP common interests as of the date of each WUP stock option grant, including the following: • the nature and history of our business; • the economic outlook in general and the outlook of our industry; • our stage of development and the competitive environment; • our historical and forecasted operating results; • our overall financial position; • the rights and preferences of WUP preferred interests relative to common interests; • the likelihood of achieving a liquidity event, such as an initial public offering or sale based on current conditions; • any adjustment necessary to recognize a discount for lack of marketability; and, • the market performance of comparable publicly-traded companies.
The Restructuring Plan is intended to streamline the Company’s organization and reduce headcount in areas of the business that do not directly impact the Company’s operations or its customers’ experience. Excluded from these actions were key operationally focused employee groups such as pilots, maintenance and operations-support personnel.
In March 2023, we announced the adoption of a restructuring plan, which was intended to streamline the Company’s organization and reduce headcount in areas of the business that do not directly impact the Company’s operations or its customers’ experience (the “Restructuring Plan”). Excluded from these actions were key operationally focused employee groups such as pilots, maintenance and operations-support personnel.
While we believe we have positioned our “Asset Right” aircraft fleet to best serve our total addressable market, the foregoing 56 factors, many of which are outside of our control, may adversely impact our ability to grow our business or provide products and services on terms attractive to our members and customers.
While we believe we have positioned our “asset-right” aircraft fleet and charter capabilities to best serve our total addressable market, the foregoing factors, many of which are outside of our control, may adversely impact our ability to retain members and sustain previous levels of flight activity, efficiently utilize our assets, grow our business, or provide products and services on terms attractive to our members and customers.
As there have not been enough transactions with available market data involving similar companies, we considered but did not apply the market approach. 71 We then used the option pricing method to allocate the equity value and determine the estimated fair value of WUP common interests.
The risks associated with achieving our forecasts were assessed in selecting the appropriate discount rates. As there have not been enough transactions with available market data involving similar companies, we considered but did not apply the market approach. We then used the option pricing method to allocate the equity value and determine the estimated fair value of WUP common interests.
The increase in operating liabilities was primarily driven by a $103.3 million increase in deferred revenue attributable to an increase in Prepaid Block purchases. During the year ended December 31, 2022, we sold $1,004.5 million of Prepaid Blocks compared to $896.7 million for the year ended December 31, 2021.
The decrease in operating liabilities was primarily driven by a $348.4 million decrease in deferred revenue attributable to a decrease in Prepaid Block purchases. During the year ended December 31, 2023, we sold $482.1 million of Prepaid Blocks compared to $1,004.5 million for the year ended December 31, 2022.
For further information about deferred revenue, see Note 5, Revenue of the Notes to Consolidated Financial Statements included herein. 67 Critical Accounting Policies and Estimates Our management’s discussion and analysis of our financial condition and results of our operations is based on our consolidated financial statements and accompanying notes, which have been prepared in accordance with accounting principles generally accepted in the U.S.
Critical Accounting Policies and Estimates Our management’s discussion and analysis of our financial condition and results of our operations is based on our consolidated financial statements and accompanying notes, which have been prepared in accordance with accounting principles generally accepted in the U.S.
WUP restricted interests contained a performance condition that provides for accelerated vesting upon the occurrence of a change in control or an initial public offering including consummation of a transaction with a special-purpose acquisition company.
WUP restricted interests contained a performance condition that provides for accelerated vesting upon the occurrence of a change in control or an initial public offering including consummation of a transaction with a special-purpose acquisition company. Earnout Shares (as defined in Note 3 ) issued in connection with the Business Combination contain market conditions for vesting.
Financing Activities 2022-1 Equipment Note Financing In October 2022, Wheels Up Partners LLC (“WUP LLC”), an indirect subsidiary of the Company, entered into a Note Purchase Agreement (the “Note Purchase Agreement”), pursuant to which WUP LLC issued $270.0 million aggregate principal amount of equipment notes (collectively, the “Equipment Notes”) using an EETC (enhanced equipment trust certificate) loan structure.
Long-Term Debt 2022-1 Equipment Notes In October 2022, WUP LLC entered into a Note Purchase Agreement, dated as of October 14, 2022 (“Note Purchase Agreement”), pursuant to which WUP LLC issued $270.0 million aggregate principal amount of the equipment notes (collectively, the “Equipment Notes”) using an EETC (enhanced equipment trust certificate) loan structure.
Adjusted Contribution and Adjusted Contribution Margin We calculate Adjusted Contribution as gross profit (loss) excluding depreciation and amortization and adjusted further for (i) equity-based compensation included in cost of revenue, (ii) acquisition and integration expense included in cost of revenue, (iii) restructuring expenses in cost of revenue and (iv) other expenses included in cost of revenue that are not indicative of our ongoing operating performance.
Adjusted Contribution and Adjusted Contribution Margin We calculate Adjusted Contribution as gross profit (loss) excluding depreciation and amortization and adjusted further for equity-based compensation included in cost of revenue and other items included in cost of revenue that are not indicative of our ongoing operating performance. Adjusted Contribution Margin is calculated by dividing Adjusted Contribution by total revenue.
Options include a mix of whole aircraft ownership, fractional ownership, jet card ownership, membership models and other forms of access. We believe our business model differentiates us within the industry by striving to reduce the upfront cost of flying private while also providing more flexibility and availability compared to traditional competitive private aviation programs.
We believe our business model differentiates us within the industry by striving to reduce the upfront cost of flying private while also providing more flexibility and availability compared to traditional competitive private aviation programs.
Equity-based compensation awards are measured at the date of grant based on the estimated fair value of the respective award and the resulting compensation expense is recognized over the requisite service period of the respective award.
Performance Award Agreement, dated March 3, 2024, between the Company and Todd Smith, our Chief Financial Officer. Equity-based compensation awards are measured at the date of grant based on the estimated fair value of the respective award and the resulting compensation expense is recognized over the requisite service period of the respective award.
Net Loss As a result of the factors described above, net loss increased $358.3 million for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Income Tax Expense Income tax expense increased $1.2 million for the year ended December 31, 2023 compared to the year ended December 31, 2022. Net Loss As a result of the factors described above, net loss decreased $68.2 million for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Adjusted EBITDA We calculate Adjusted EBITDA as net income (loss) adjusted for (i) interest income (expense), (ii) income tax expense, (iii) depreciation and amortization, (iv) equity-based compensation expense, (v) acquisition and integration related expenses, (vi) public company readiness related expenses, (vii) restructuring charges, (viii) change in fair value of warrant liability, (ix) losses on the extinguishment of debt and (x) other items not indicative of our ongoing operating performance.
Adjusted EBITDA We calculate Adjusted EBITDA as net income (loss) adjusted for (i) interest income (expense), (ii) income tax expense, (iii) depreciation and amortization, (iv) equity-based compensation expense, (v) acquisition and integration related expenses and (vi) other items not indicative of our ongoing operating performance, including but not limited to, restructuring charges.
Loss on Extinguishment of Debt Loss on extinguishment of debt consists of the write off of unamortized debt discounts and deferred financing costs associated with the early repayment of credit facilities and promissory notes. Interest Income Interest income primarily consists of interest earned on cash equivalents in money market funds, U.S. treasury bills and time deposits.
Interest Income Interest income primarily consists of interest earned on cash equivalents in money market funds, U.S. treasury bills and time deposits. Interest Expense Interest expense primarily consists of the interest paid or payable and the amortization of debt discounts and deferred financing costs on our credit facilities, promissory notes and other debt obligations.
Contractual Obligations and Commitments As of December 31, 2022, our principal commitments consisted of contractual cash obligations under the Equipment Notes, operating leases for certain controlled aircraft, corporate headquarters, and operational facilities, including aircraft hangars, and ordinary course arrangements involving our obligation to provide services for which we have already received deferred revenue.
Contractual Obligations and Commitments As of December 31, 2023, our principal ongoing commitments consisted of contractual cash obligations to pay principal and interest payments under the Equipment Notes, principal and accrued interest under the Credit Agreement when due at maturity, operating leases for certain controlled aircraft, leased facilities, including our corporate headquarters at the Atlanta Member Operations Center, our corporate office in New York, New York, and other operational facilities, such as hangars and maintenance facilities, and ordinary course arrangements involving our obligation to provide services for which we have already received deferred revenue.
Costs and Expenses Cost of Revenue Cost of revenue increased $422.7 million, or 38%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Costs and Expenses Cost of Revenue Cost of revenue decreased $307.8 million, or 20%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
For further information on the Equipment Notes, see “—Long-Term Debt” above and Note 10, Long-Term Debt of the Notes to Consolidated Financial Statements included herein. For further information about our lease obligations, see Note 12, Leases of the Notes to Consolidated Financial Statements included herein.
For further information on the Equipment Notes, Term Loan and Revolving Credit Facility, see “ Long-Term Debt ” above and Note 9 , Long-Term Debt of the Notes to Consolidated Financial Statements included herein.
Active Members We define Active Members as the number of Connect, Core and Business membership accounts that generated membership revenue in a given period and are active as of the end of the reporting period.
As previously reported, Live Flight Legs for the year ended December 31, 2021 was 73,522. Active Members We define Active Members as the number of Connect, Core and UP for Business membership accounts that generated membership revenue in a given period and are active as of the end of the reporting period.
If Wheels Up has primary responsibility to fulfill the obligation, then the revenue and the associated costs are reported on a gross basis in the consolidated statements of operations. 68 Business Combinations and Asset Acquisitions We account for business combinations and asset acquisitions using the acquisition method of accounting, which requires allocation of the purchase price to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date.
Business Combinations and Asset Acquisitions We account for business combinations and asset acquisitions using the acquisition method of accounting, which requires allocation of the purchase price to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date.
The Note Purchase Agreement and the Indentures and related guarantees contain certain covenants, including a liquidity covenant that requires the Company to maintain minimum liquidity of $125 million, a covenant that limits the maximum loan to value ratio of all aircraft financed, subject to certain cure rights of the Company, and restrictive covenants that provide limitations under certain circumstances on, among other things: (i) certain acquisitions, mergers or disposals of its assets; (ii) making certain investments or entering into certain transactions with affiliates; (iii) prepaying, redeeming or repurchasing the Equipment Notes, subject to certain exceptions; and (iv) paying dividends and making certain other specified restricted payments.
The Note Purchase Agreement and the Indentures and related guarantees, as each was amended by the Omnibus Amendment, contain certain covenants, including, among others: a liquidity covenant that requires the Company and its subsidiaries to maintain minimum aggregate available cash and Cash Equivalents (as defined in the Note Purchase Agreement), including $20.0 million held in deposit for the benefit of the lenders that is included in Other non-current assets on our consolidated balance sheet as of December 31, 2023, of $75.0 million on any date; a covenant that limits the maximum loan to appraised value ratio of all aircraft financed, subject to certain cure rights of the Company; and restrictive covenants that provide limitations under certain circumstances on certain acquisitions, mergers or disposals of assets, making certain investments or entering into certain transactions with affiliates, prepaying, redeeming or repurchasing the Equipment Notes, subject to certain exceptions, and paying dividends and making certain other specified restricted payments.
We review long-lived assets for impairment at the individual asset or the asset group level for which the lowest level of independent cash flows can be identified and measured. If the carrying amount of a long-lived asset or asset group is determined not to be recoverable, an impairment loss is recognized and a write-down to fair value is recorded.
We review long-lived assets for impairment at the individual asset or the asset group level for which the lowest level of independent cash flows can be identified and measured.
(4) Represents non-cash impairment charges related to goodwill realized in the third and fourth quarters of the fiscal year ended December 31, 2022. See Note 2, Summary of Significant Accounting Policies and Note 7, Goodwill and Intangible Assets in the of the Notes to Consolidated Financial Statements included herein.
(5) Represents non-cash impairment charge related to goodwill recognized in the second and third quarters of 2023, and the third and fourth quarters of 2022. See Note 7 , Goodwill and Intangible Assets of the Notes to Consolidated Financial Statements included herein.
(5) Related to a one-time charge for certain aged receivables and inventory.
For the year ended December 31, 2022, includes amounts related to a one-time charge for certain aged receivables and inventory.
Key Operating Metrics In addition to financial measures, we regularly review certain key operating metrics to evaluate our business, determine the allocation of resources and make decisions regarding business strategies. We believe that these metrics can be useful for understanding the underlying trends in our business.
(2) See “Key Operating Metrics” for more information about Charter FTV and Other Charter FTV. 57 Key Operating Metrics In addition to financial measures, we regularly review certain key operating metrics to evaluate our business, determine the allocation of resources and make decisions regarding business strategies.
The Equipment Notes are secured by first-priority liens on 134 of the Company’s owned aircraft fleet and by liens on certain intellectual property assets of the Company and certain of its subsidiaries. WUP LLC’s obligations under the Equipment Notes are guaranteed by the Company and certain of its subsidiaries.
As of December 31, 2023, the Equipment Notes were secured by first-priority liens on 122 of the Company’s owned aircraft fleet and by 65 liens on certain intellectual property assets of the Company and certain of its subsidiaries (the “Equipment Note Collateral”).
Under this method, deferred tax assets and liabilities are recorded based on the estimated future tax effects of differences between the financial reporting and tax bases of existing assets and liabilities. These differences are measured using the enacted tax rates that are expected to be in effect when these differences are anticipated to reverse.
Income Tax Expense Income tax expense consists of income taxes recorded using the asset and liability method. Under this method, deferred tax assets and liabilities are recorded based on the estimated future tax effects of differences between the financial reporting and tax bases of existing assets and liabilities.
See “Non-GAAP Financial Measures” above for a definition of Adjusted Contribution Margin, information regarding our use of Adjusted Contribution Margin and a reconciliation of gross margin to Adjusted Contribution Margin. Technology and Development Technology and development expenses increased $23.7 million, or 70%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.
See “Non-GAAP Financial Measures” above for a definition of Adjusted Contribution Margin, information regarding our use of Adjusted Contribution Margin and a reconciliation of Gross margin to Adjusted Contribution Margin.
Impairment of Goodwill We recorded non-cash goodwill impairment charges totaling $180.0 million in the second half of the year ended December 31, 2022, following our interim quantitative goodwill impairment tests performed over WUP Legacy as of September 30, and December 31, 2022 (see Notes 2 and 7 in the Notes to Consolidated Financial Statements included herein).
Impairment of Goodwill We recorded non-cash goodwill impairment charges totaling $126.2 million in the second and third quarters of the year ended December 31, 2023, following interim quantitative goodwill impairment tests performed over the WUP Legacy reporting unit as of June 1, 2023 and September 20, 2023.
Consumer confidence, fluctuations in fuel prices, inflation, increases in interest rates, geopolitical instability, changes in governmental regulations, safety concerns and other factors all could negatively impact our business. Typically, the larger cabin classes of aircraft are more sensitive to and affected by economic cycles.
Consumer confidence, fluctuations in fuel prices, inflation, increases in interest rates, geopolitical instability, changes in governmental regulations, safety concerns and other factors all could negatively impact our business. In addition, our members and customers may resort to other options for travel more or less frequently depending on the economic cycle.
(“Aspirational”), a blank check 61 company (the “Business Combination’), including 7,991,544 public warrants (“Public Warrants”) and 4,529,950 private warrants (the “Private Warrants” and, together with the Public Warrants, the “Warrants”).
(“Aspirational”), a blank check company (the “Business Combination’), including 7,991,544 public warrants (“Public Warrants”) and 4,529,950 private warrants (the “Private Warrants” and, together with the Public Warrants, the “Warrants”), in each case exercisable for 1/10th of one share of Common Stock at an exercise price of $115.00 per whole share of Common Stock.
Each Indenture contains customary events of default for Equipment Notes of this type, including cross-default provisions among the Equipment Notes. WUP LLC’s obligations under the Equipment Notes are guaranteed by the Company and certain of its subsidiaries.
Each Indenture contains customary events of default for Equipment Notes of this type, including cross-default provisions among the Equipment Notes and the Term Loan and Revolving Credit Facility.
For performance-based awards, the grant date fair value of the award is expensed over the vesting period when the performance condition is considered probable of being achieved. Earnout Shares issued in connection with the Business Combination contain market conditions for vesting.
For performance-based awards, the grant date fair value of the award is expensed over the vesting period when the performance condition is considered probable of being achieved. Compensation expense related to an award with a market condition is recognized over the requisite service period and is not reversed if the market condition is not satisfied.
The industry is customer driven and highly competitive. Our ability to retain members is a key factor in our ability to generate revenue. We are impacted by current trends in both how technology is used to book private aviation services and how new business models are expanding the types and variety of flight services offered.
We are also impacted by current trends in private aviation business models, including types and variety of flight services offered, as well as the manner in which technology is used to book private aviation services.
Gain on Sale of Aircraft Held for Sale Gain on sale of aircraft held for sale consists of the gain on aircraft previously held as property and equipment and subsequently elected to actively market for sale or aircraft purchased where our intent to sell and not to hold the asset long-term.
Depreciation and Amortization Depreciation and amortization expense primarily consists of depreciation of capitalized aircraft, as well as amortization of capitalized software development costs and acquired finite-lived intangible assets. 60 Gain on Sale of Aircraft Held for Sale Gain on sale of aircraft held for sale consists of the gain on aircraft previously held as property and equipment and subsequently elected to actively market for sale or aircraft purchased with the intent to sell.
As we experience inflationary pressures, including wage and medical costs, or supply chain disruptions for parts and supplies our margins are negatively impacted. In addition, we are investing significant time and resources into developing sophisticated pricing and scheduling algorithms and data optimization engines to help optimize the utility and efficiency of our fleet.
We are working to find additional opportunities to enhance margins and operate more efficiently, while elevating the member experience and delivering operational excellence. In addition, we are investing significant time and resources into developing sophisticated pricing and scheduling algorithms and data optimization engines to help optimize the utility and efficiency of our fleet.
Membership revenue is generated from initiation and annual renewal fees across three different annual membership tiers — Connect, Core and Business — each of which is designed to provide the varying services required across a range of existing and potential private flyers.
Membership revenue is generated from initiation fees and annual dues, which provide members with access to one of the world’s largest combined fleets of owned, leased and third-party aircraft. Our member programs are designed to provide the varying services required across a range of existing and potential private flyers.
Depreciation and Amortization Depreciation and amortization expenses increased $11.7 million, or 22%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Depreciation and Amortization Depreciation and amortization expenses decreased $7.4 million, or 11%, for the year ended December 31, 2023 compared to the year ended December 31, 2022. The decrease was primarily attributable to a $7.1 million decrease related to aircraft associated disposed of during the period.
The following table summarizes our key operating metrics: As of December 31, 2022 2021 % Change Active Members 12,661 12,040 5 % Year Ended December 31, 2022 2021 % Change Active Users (1) 13,846 12,543 10 % Live Flight Legs 79,664 73,522 8 % Flight Revenue per flight leg 13,470 11,884 13 % __________________ (1) Active Users presented for annual periods are Active Users for the fourth quarter of the year presented.
The following table summarizes our key operating metrics and omits the results of Air Partner before April 1, 2022, the date of acquisition: As of December 31, 2023 2022 % Change Active Members 9,947 12,661 (21) % Year Ended December 31, 2023 2022 % Change Active Users (1) 10,744 13,846 (22) % Live Flight Legs 64,481 79,664 (19) % Flight Revenue per Live Flight Leg $ 13,710 $ 13,470 2 % Total Private Jet Flight Transaction Value per Live Flight Leg (2) $ 15,863 $ 14,721 8 % Year Ended December 31, 2023 2022 2021 Charter FTV $ 333,898 $ 232,126 $ 180,113 Other Charter FTV $ 177,345 $ 164,318 $ — __________________ (1) Active Users presented for annual periods are Active Users for the fourth quarter of the year presented.
Depreciation and Amortization Depreciation and amortization expense primarily consists of depreciation of capitalized aircraft as well as amortization of capitalized software development costs and acquired finite-lived intangible assets. We allocate overhead such as facility costs and telecommunications charges, based on department headcount, as we believe this to be the most accurate measure.
General and administrative expense also includes any other cost or expense incurred not deemed to be related to cost of revenue, sales and marketing expense or technology and development expense. We allocate overhead such as facility costs and telecommunications charges, based on department headcount, as we believe this to be the most accurate measure.
Component of Results of Our Operations The key components of our results of operations include: Revenue Revenue is derived from flight, membership, aircraft management and other services. Flight revenue consists of retail and wholesale flights. Members can either pay as they fly or prepay for flights when they purchase a Prepaid Block.
Flight revenue consists of flight services, whether through our member programs or charter solutions (excluding group and cargo charter), and wholesale flights and certain related fees and surcharges. Members can either pay as they fly or prepay for flights when they purchase a Prepaid Block.
Equity-Based Compensation Prior to the Business Combination, we issued equity-based compensation awards to employees and consultants, including stock options, profits interests and restricted interests, under the WUP option plan and WUP management incentive plan.
If the carrying amount of a long-lived asset or asset group is determined not to be recoverable, an impairment loss is recognized and a write-down to fair value is recorded. 70 Equity-Based Compensation Prior to the Business Combination, we awarded equity-based compensation to employees and consultants, including stock options, profits interests and restricted interests, under the WUP option plan and WUP management incentive plan.
All membership options provide access through the Wheels Up mobile app and website to on-demand charter flights, dynamic pricing, a variety of Shared Flights, empty-leg Hot Flights, Shuttles, and the Wheels Up Community, an online platform of members-only forums to facilitate flight sharing, enabling members to reduce their cost of flying private.
All membership options provide access through the Wheels Up mobile app and website to on-demand charter flights and dynamic pricing.
WUP LLC is also obligated to cause additional subsidiaries and affiliates of WUP LLC to become guarantors under certain circumstances. 66 Cash Flows The following table summarizes our cash flows for the years ended December 31, 2022, and 2021 (in thousands): Year Ended December 31, 2022 2021 Net cash provided by (used in) operating activities $ (230,689) $ 126,490 Net cash used in investing activities $ (175,242) $ (38,670) Net cash provided by financing activities $ 244,786 $ 374,026 Net increase (decrease) in cash, cash equivalents and restricted cash $ (166,569) $ 461,846 Cash Flow from Operating Activities Net cash used in operating activities for the year ended December 31, 2022 was $230.7 million.
Cash Flows The following table summarizes our cash flows for the years ended December 31, 2023, and 2022 (in thousands): Year Ended December 31, 2023 2022 Net cash used in operating activities $ (665,285) $ (230,689) Net cash provided by (used in) investing activities $ 40,870 $ (175,242) Net cash provided by financing activities $ 300,954 $ 244,786 Net decrease in cash, cash equivalents and restricted cash $ (327,328) $ (166,569) Cash Flow from Operating Activities The cash outflow from operating activities during the year ended December 31, 2023 primarily consisted of our net loss, net of non-cash charges, of $269.0 million and a $392.2 million decrease in operating liabilities, partially offset by a $7.0 million increase in operating assets.
Members are also able to purchase dollar-denominated credits that can be applied to future costs incurred by members, including annual dues, flight services and other incidental costs such as catering and ground transportation (“Prepaid Blocks”).
We have historically provided the majority of our private aviation services through our membership program, which allows members to select the membership level best 48 tailored for their flying needs and receive additional benefits from the purchase of dollar-denominated credits that can be applied to future costs, including flight services, annual dues, and other incidental costs such as catering and ground transportation (“Prepaid Blocks”).
The nature of the flight services we provide to members is similar regardless of which third-party air carrier is involved. Wheels Up directs third-party air carriers to provide an aircraft to a member or customer.
The nature of the flight services we provide to members is similar regardless of which third-party air carrier is involved. If Wheels Up has primary responsibility to fulfill the obligation, then the revenue and the associated costs are reported on a gross basis in the consolidated statements of operations.
We include Adjusted Contribution and Adjusted Contribution Margin as supplemental measures for assessing operating performance and for the following: • Used to understand our ability to achieve profitability over time through scale and leveraging costs; and, • Provides useful information for historical period-to-period comparisons of our business and to identify trends. 58 The following table reconciles Adjusted Contribution to gross profit, which is the most directly comparable GAAP measure (in thousands, except percentages): Year Ended December 31, 2022 2021 Revenue $ 1,579,760 $ 1,194,259 Less: Cost of revenue (1,540,325) (1,117,633) Less: Depreciation and amortization (65,936) (54,198) Gross profit (loss) $ (26,501) $ 22,428 Gross margin (1.7)% 1.9% Add back: Depreciation and amortization $ 65,936 $ 54,198 Equity-based compensation expense in cost of revenue 14,456 4,541 Acquisition and integration expense in cost of revenue 3,060 1,010 Restructuring expense in cost of revenue 34 — Other (1) 961 — Adjusted Contribution $ 57,946 $ 82,177 Adjusted Contribution Margin 3.7 % 6.9 % ___________________ (1) Related to a one-time charge for certain aged inventory.
The following table reconciles Adjusted Contribution to gross profit (loss), which is the most directly comparable GAAP measure (in thousands, except percentages): Year Ended December 31, 2023 2022 Revenue $ 1,253,317 $ 1,579,760 Less: Cost of revenue 1,232,506 1,540,325 Less: Depreciation and amortization 58,533 65,936 Gross profit (loss) $ (37,722) $ (26,501) Gross margin (3.0) % (1.7) % Add back: Depreciation and amortization $ 58,533 $ 65,936 Equity-based compensation expense in cost of revenue 3,927 14,456 Acquisition and integration expense in cost of revenue (1) — 3,060 Restructuring expense in cost of revenue (2) 1,075 34 Atlanta Member Operations Center set-up expense in cost of revenue (3) 24,704 — Certificate consolidation expense in cost of revenue (4) 8,044 — Other (5) 3,975 961 Adjusted Contribution $ 62,536 $ 57,946 Adjusted Contribution Margin 5.0 % 3.7 % ___________________ (1) Consists of expenses incurred associated with acquisitions, as well as integration-related charges incurred within one year of acquisition date.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

8 edited+2 added−3 removed2 unchanged
Biggest changeChanges in interest rates may impact our ability to refinance the Equipment Notes or obtain additional financing on attractive terms or at all. Aircraft Fuel We are subject to market risk associated with changes in the price and availability of aircraft fuel.
Biggest changeIn addition, borrowings under the Revolving Credit Facility, if any, accrue interest at a fixed interest rate. Changes in interest rates may impact payments under any variable leases that we may enter into from time to time, our ability to refinance the Equipment Notes or Credit Facility, or obtain additional financing on attractive terms or at all.
Changes in interest rates could lead to significant fluctuations in the fair value of the Equipment Notes or our cash equivalents, which are primarily in the form of money market funds, U.S. treasury bills and time deposits.
Changes in interest rates could lead to significant fluctuations in the fair value of our indebtedness, including the Equipment Notes and Credit Facility, or our cash equivalents, which are primarily in the form of money market funds, U.S. treasury bills and time deposits.
Based on our 2022 fuel consumption, a hypothetical 10% increase in the average price per gallon of aircraft fuel would have increased fuel expense by approximately $22 million for the year ended December 31, 2022.
Based on our 2023 fuel consumption, a hypothetical 10% increase in the average price per gallon of aircraft fuel would have increased fuel expense by approximately $17.3 million for the year ended December 31, 2023. We do not purchase or hold any derivative instruments to protect against the effects of changes in fuel.
Aircraft fuel expense for the year ended December 31, 2022 represented 15% of our total cost of revenue and includes the recharge of fuel costs to our aircraft management customers.
Aircraft Fuel We are subject to market risk associated with changes in the price and availability of aircraft fuel. Aircraft fuel expense for the year ended December 31, 2023 represented 14% of our total cost of revenue and includes the recharge of fuel costs to our aircraft management customers.
Beginning on June 1, 2022, we 72 calculated and billed the fuel surcharge based on the cost of Jet A fuel, which limits our direct exposure to volatility in Jet A fuel prices to the extent the fuel surcharge applies.
Under our agreements with our members, we bill members a fuel price surcharge based on the cost of Jet A fuel for programmatic flights, which limits our direct exposure to volatility in Jet A fuel prices to the extent the fuel surcharge applies.
Foreign Currency Exchange We are subject to foreign currency exchange risk primarily through Air Partner’s international operations, which involve revenue and expenses denominated in foreign currencies. To manage foreign currency exchange risk, we execute international revenue and expense transactions in the same foreign currency to the extent practicable.
Our direct exposure to fluctuations in aircraft fuel prices for such arrangements is limited. Foreign Currency Exchange We are subject to foreign currency exchange risk primarily through Air Partner’s international operations, which involve revenue and expenses denominated in foreign currencies.
As of December 31, 2022, we did not hold any derivative instruments to protect against the risk of foreign currency fluctuations. 73
As of December 31, 2023, we held an inconsequential amount of such forward contracts to protect against the risk of foreign currency fluctuations. 73
See the caption “ Fuel Surcharge and Carbon Offset Fee ” set forth in Part II, Item 7 — “ Management’s Discussion and Analysis of Operations ” in this Annual Report on Form 10-K for further information regarding the details of the fuel surcharge.
See the caption “ Fuel ” set forth in Part I, Item 1 — “ Business ” in this Annual Report for further information regarding the details of the fuel surcharge. Fuel costs for charter flights on third-party aircraft are generally paid by the charter customer as part of the total cost of the flight.
Removed
In October 2022, WUP LLC, an indirect subsidiary of the Company, entered into a Note Purchase Agreement, pursuant to which WUP LLC issued $270.0 million aggregate principal amount of Equipment Notes. The Equipment Notes bear interest at the fixed rate of 12% per annum. As of December 31, 2022, all of the Company’s long-term debt obligations had fixed interest rates.
Added
As of December 31, 2023, all of the Company’s long-term debt obligations, which comprised primarily of the Equipment Notes and Term Loan, had fixed interest rates, and none of the Company’s variable lease obligations utilized market interest rates as the basis for determining payments.
Removed
We do not purchase or hold any derivative instruments to protect against the effects of changes in fuel but due to our dynamic pricing we do have some ability to raise our prices on flights not subject to a capped rate.
Added
To manage foreign currency exchange risk, we execute international revenue and expense transactions in the same foreign currency to the extent practicable. From time to time, we may also enter into option or forward contracts to hedge foreign currency exchange risk that are not for speculative purposes.
Removed
In addition, our agreements allow us to potentially bill members a fuel price surcharge and we exercised our right to apply this surcharge to our hourly rate for the first time on April 9, 2022. Subsequently, on May 2, 2022, we announced a new fuel surcharge framework.

Other UP 10-K year-over-year comparisons