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Why Shares of Wheels Up Experience Are Flying High Today

By Lou Whiteman - May 13, 2022 at 1:07PM

Key Points

  • Wheels Up lost more than expected in the first quarter, but also posted strong growth numbers.
  • This transportation membership service is in its early days, but seems to be gaining traction.
  • Wheels Up also is initiating new systems designed to bring down losses.

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Investors got the growth they were looking for.

What happened

Private aviation membership service Wheels Up Experience (UP -1.21%) reported a larger-than-expected quarterly loss, but also provided evidence the business is progressing in the right direction. Investors liked what they heard, sending shares of Wheels Up as much as 15% higher in Friday trading.

So what

Wheels Up is a new twist on the fractional jet ownership business, providing private plane transportation to members. Wheels Up went public in 2021 via a special purpose acquisition company (SPAC), and in the time since has been working to establish and grow its business.

A private plane traveler looks at a tablet computer.

Image source: Getty Images.

On Thursday, after markets closed, Wheels Up said it lost $0.36 per share in the first quarter on revenue of $325.6 million. The revenue number beat the consensus estimate of $310 million in sales, but Wheels Up lost four cents per share more than expected.

Overall, the growth numbers look promising. Revenue was up 24% year over year, and Wheels Up grew its active member roster by 26% to 12,424. Wheels Up also put some of its SPAC money to work in acquiring Air Partner plc, giving the company a platform to expand its offering globally.

Wheels Up is feeling good enough about demand that it is implementing another rate increase, the second in the last seven months.

Now what

Wheels Up has also moved most of its owned and operated fleet to its new management system, allowing it to handle reservations and crew scheduling more efficiently. Company president Vinayak Hegde said that the streamlining, coupled with the acquisition of Air Partner, sets Wheels Up well for 2022.

"Continued execution on these initiatives, coupled with the acquisition of Air Partner, the implementation of fuel surcharges and additional capped rate price increases gives us confidence that the company will show strong margin improvements over the course of the year," Hegde said.

Shares of Wheels Up had been sliced in half year to date prior to the earnings, and the stock after an early-morning boost Friday was losing some of its momentum mid-day. Investors need to understand that this remains a high-risk stock. But given the progress the company has made attracting members, and its strategic advantages including a partnership with Delta Air Lines, there is more to be optimistic about now than there was prior to the earnings announcement.

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