Wealth

Wheels Up buys Gama, becoming top rival to NetJets

Key Points
  • Wheels Up acquired jet operator Gama Aviation, creating the second-biggest private aviation company in the U.S.
  • Financial terms weren't disclosed.
  • The deal transforms Wheels Up, founded in 2013 by Kenny Dichter with a focus on short-trip turbo-props, into an all-purpose private jet company going head to head against industry giant NetJets.
A Gama Aviation Gulfstream 4SP (Photo by:
Aviation-images.com | Universal Images Group | Getty Images

Wheels Up, the fast-growing private aviation start-up, acquired jet operator Gama Aviation, creating the second-biggest private aviation company in the U.S.

Terms weren't disclosed by the two companies, which are both privately held. But the deal transforms Wheels Up, founded in 2013 by Kenny Dichter with a focus on short-trip turbo-props, into an all-purpose private jet company going head to head against industry giant NetJets.

"There are now only two players operating at this scale," Dichter told CNBC in an interview. "Wheels Up and NetJets."

The deal marks the latest in a string of acquisitions by Wheels Up to attract more private jet-setters and expand its fleet and services.

Last year, the company bought Delta's private jet division, which owned and operated a fleet of private jets. Wheels Up also bought Travel Management Co., which operates smaller light jets, and Avianis Systems, a leading aviation-tech company that boosted Wheels Up's digital services.

The company's rapid expansion has its risks. While the private aviation business remains strong, a global economic downturn could quickly hurt demand. Wheels Up and other private jet companies have also used debt to grow, which could be difficult to service if the industry gets hit with a prolonged demand shock.

Dichter said that neither the Delta deal nor the Gama deal came with any debt. And he said Wheels Up now carries a valuation of over $1.5 billion.

"Our goal is to make it as easy to book a private jet as booking an AirBnb or Uber," Dichter said.

The Gama deal gives Wheels Up a total fleet size of more than 300 aircraft, well above rivals like Vista Global Holdings and Directional Aviation. Gama, which doesn't own planes but manages them for private and corporate owners, was already supplying smaller planes to Wheels Up. But the deal allows Wheels Up customers access to larger, longer-range jets that Gama managed, like G550s, G650s and Global Express jets.

Wheels Up now has 8,000 members and expects to end 2020 with 10,000, Dichter said. A core membership has an initiation fee of $17,500, with annual dues starting in year two of $8,500. For corporate members, there is a $29,500 initiation fee, and dues starting in year two of $14,500. The company also just launched a less-expensive "connect" membership that has an initiation fee of $2,995, with annual dues, starting in the second year, of $2,495. That membership level allows customers to book shared or charter flights.

"This puts us in the total aviation solution business," Dichter said.

VIDEO2:1602:16
Delta Air Lines CEO Ed Bastian on partnership with Wheels Up

CORRECTION: This story was updated to provide additional information about the company's fee structure. It contains both an initiation fee and an annual fee.