spot_img
Wednesday, April 17, 2024

Wheels Up sues Kinston’s flyExclusive over flight contract flap

flyExclusive private jet in flightFlyExclusive is facing a lawsuit from a peer company that has provided the Kinston-based charter-jet provider with much of its business.

Wheels Up alleged flyExclusive caused serious harm by terminating a contract to fly its members last Friday, just before the busy July 4 holiday week, according to the filing in U.S. District Court Southern District of New York. Wheels Up is the third-largest private-jet provider, while flyExclusive is fifth, according to the Private Jet Cards Comparison website.

Since November 2021, Wheels Up had contracted with flyExclusive for flights because it needed capacity to meet members’ demand, and the North Carolina company had space on its jets.

Wheels Up has more than 12,000 members who pay for the right to take trips on private jets, including 200 company-owned ones. Thirty of flyExclusive’s 90 jets were dedicated to flying Wheels Up customers, the N.C. company has said.

On the eve of the holiday, flyExclusive “baselessly demanded hundreds of thousands of dollars to charter flights it was already contractually obligated to complete — despite the fact that flyExclusive retained millions of dollars in deposits provided by Wheels Up under the agreement,” according to the lawsuit. In 2021, the N.C. company received $37.5 million from Wheels Up to secure the aircraft, through a contract slated to end in March 2024.

Asked for comment, flyExclusive said it terminated its agreement because Wheels Up was in default. “The complaint Wheels Up filed, which is unjustified, is a result of such termination,” the company said in a statement. “We remain willing to fly for Wheels Up if they are able to pay us in advance.”

After flyExclusive sent the termination note, Wheels Up paid $300,000 to the N.C. company to serve more than 75 passengers slated for flights last Saturday, according to the lawsuit. Then, flyExclusive asked for another $300,000, prompting Wheels Up to rebook its customers with other operators.

The litigation comes amid financial problems at Wheels Up, which reported a loss of $101 million in the first quarter. Its stock declined more than 95% since going public in July 2021 and founder Kenny Dichter resigned as CEO in May. Interim CEO Todd Smith said Wheels Up would have positive cash flow in 2024 because of changing policies and reduced expenses.

Meanwhile, FlyExclusive is seeking to go public later this year through a combination with EG Acquisition, a New York-based special-purpose acquisition company, or SPAC. Efforts to launch the IPO have been stymied with relatively few new offerings occurring this year.

The SPAC transaction values FlyExclusive at $600 million. Its fleet has grown from 45 jets in 2019 to an expected 110 by the end of this year.

FlyExclusive is expected to have EBITDA of about $64 million this year, then $130 million next year, according to a May proxy filing. FlyExclusive CEO Jim Segrave expects to double last year’s sales of $260 million to almost $730 million in 2024, he told Bloomberg in May.

Segrave, who controls about 70% of LGM Enterprise’s equity, said his operating model is sounder than Wheels Up and other rivals. Most of the company’s 800 employees are based in Kinston, many of them providing aircraft maintenance services.

 

David Mildenberg
David Mildenberg
David Mildenberg is editor of Business North Carolina. Reach him at dmildenberg@businessnc.com.

Related Articles

TRENDING NOW

Newsletters