Q4 2021 Wheels Up Experience Inc Earnings Call
conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star followed by the number two. It is now my pleasure to introduce Keith Ferguson. Mr. Keith Ferguson, you may now begin.
Fourth quarter 2021 earnings conference call all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there'll be a question and answer session. If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question. Please press star followed by the number changed it.
My pleasure to introduce Keith Ferguson Mr. Qi.
You May now begin the conference call.
Okay. Thank you and welcome again to <unk> fourth quarter 2021 earnings Conference call earlier today, we issued a press release announcing our financial results for the period.
Keith Ferguson: So thank you and welcome again to Wheels Up's fourth quarter 2021 earnings conference call. Earlier today, we issued a press release announcing our financial results for the period. The release, with its supporting tables, as well as a copy of today's presentation, can be found in our investor relations website at wheelsup.com slash investor.
With its supporting tables as well as a copy of today's presentation can be found on our Investor Relations website at <unk> Dot com slash investors. Please.
Keith Ferguson: Please refer to the slide with our disclaimer. Today's presentation contains forward-looking statements based on our current forecast and expectations of future events. These statements should be considered estimates only, and actual results may differ materially.
Please refer to the slide with our disclaimer. Today's presentation contains forward looking statements based on our current forecast and expectations of future events. These statements should be considered estimates only and actual results may differ materially.
Speaker Change: During today's call, we will refer to non-GAAP financial measures as outlined by SEC guidelines. Unless otherwise noted, all income statement related financial measures will be non-GAAP other than revenue. Reconciliations of GAAP to non-GAAP financial measures and definitions of non-GAAP financial measures are found within the financial tables of our earnings release and appendix of today's presentation. And with that, I'd like to turn the call over to our Chairman and Chief Executive Officer, Kenny <expletive> .
During today's call, we will refer to non-GAAP financial measures as outlined by SEC guidelines unless otherwise noted all income statement related financial measures will be non-GAAP other than revenue reconciliations of GAAP to non-GAAP financial measures and definitions of non-GAAP financial measures are found within the financial tables of our earnings release.
In the appendix of today's presentation.
And with that I'd like to turn the call over to our chairman and Chief Executive Officer, Kenny Victor.
Kenny Dick: Thank you, Keith, and thanks to all of you for joining us today.
Thank you Keith and thanks to all of you for joining us today.
Kenny Dick: Quick disclaimer I have a little cold and my voice is a little raspy. That said I'm pleased to report another quarter of record revenue as we continue to see unprecedented demand across our platform.
Quick disclaimer.
I have a little cold and my voice is a little raspy.
Ted I'm pleased to report another quarter of record revenue as we continue to see unprecedented demand across our platform.
Kenny Dick: the private aviation industry is ripe for disruption. Despite flying highly sophisticated aircraft, the industry has historically taken an analog and antiquated approach to optimizing supply and demand.
The private aviation industry is ripe for disruption despite flying highly sophisticated aircrafts. The industry has historically taken in analog an antiquated approach to optimizing supply and demand.
Kenny Dick: The surge in demand over the past year has exposed the limitations of the industry's fragmented supply and consumers have felt the pain.
The surge in demand over the past year have exposed the limitations of the industry's fragmented supply and consumers they felt the pain.
Kenny Dick: What it has also done is to highlight the tremendous efficiencies that can be gained with a technology enabled marketplace that seamlessly connects supply and demand. We are building.
What it is also done is to highlight the tremendous efficiencies that can be gained with a technology enabled marketplace, which seamlessly connects supply and demand we.
We are building that marketplace.
Kenny Dick: We are still in the early stages, but our playbook, similar to the one used by Uber and Airbnb, is a proven winner.
We are still in the early stages, but our playbook similar to the one used by Uber and Airbnb is a proven winner.
Kenny Dick: In short, our vision has never been clearer, our strategy has never been more relevant, and we continue to make meaningful progress in building the future marketplace for private travel.
In short our vision has never been clearer our strategy has never been more relevant and we continue to make meaningful progress in building the future marketplace for private travel.
Kenny Dick: Bringing demand onto your platform is typically the most difficult part of building a two sided marketplace. That is not the case for wheels up. Today we are a clear leader with a growing base of more than 12000 members.
Bringing demand onto your platform is typically the most difficult part of building a two sided marketplace that is not the case, where we all that today, we are a clear leader with a growing base of more than 12000 members.
Kenny Dick: We have built an iconic brand in private aviation and forged a strong and unique commercial relationship with Delta Airlines.
We have built an iconic brand in private aviation and forged a strong and unique commercial relationship with Delta Airlines.
Kenny Dick: as well as brand partnerships with global powerhouses like American Express and Porsche.
As well as brand partnerships with global powerhouses like American Express enforce.
And after a two year hiatus, we have returned to us and certain signature live events.
Kenny Dick: And after a two year hiatus, we have returned to hosting certain signature live events around the Super Bowl, around the Masters, and around Art Basel. And we continue to work with a host of A-list ambassadors to help Wheels Up tell its story on the largest stages while generating important earned media for our brand.
Around the Super Bowl around the masters in around our Basel and we continue to work with a host of a list and bachelors to help wheels up pellet story on the largest stages, while generating important earn media for our brand.
Kenny Dick: All of that creates a competitive advantage that sets us on a strong path for continued growth.
All of that creates a competitive advantage that sets us on a strong path for continued growth.
Yes.
Kenny Dick: Today, we have our sights set on the supply side of the industry, where we believe our focus on innovation will drive efficiency and unlock more capacity to meet the strong demand. Our strategy is to develop leading edge technology to bridge this gap. We are building a platform that will leverage machine learning and AI tools to streamline our operations, automate scheduling, improve customer experience, create real time incentives to fill available aircraft, and generally make it easier to fly products.
Today, we have our sights set on the supply side of the industry, where we believe our focus on innovation will drive efficiency and unlock more capacity to meet the strong demand for our strategy is to develop leading edge technology to bridge. This gap. We are building a platform that will leverage machine learning and AI tools to streamline our operations auto.
Scheduling improved customer experience.
Real time incentives to fill available aircraft and generally make it easier to fly product we.
Kenny Dick: We also believe this platform will open up a world of possibilities beyond aviation.
We also believe this platform will open up a world of possibilities beyond aviation.
Kenny Dick: This type of disruption requires a disruptive leadership team capable of moving quickly to capitalize on our competitive advantages and the clear opportunities we see around us.
This type of disruption requires the disruptive leadership team capable of moving quickly to capitalize on our competitive advantages and the clear opportunities we see around us.
Kenny Dick: That's why we added and continue to add key technology focused executives from outside our industry to bring new perspectives to an old way of doing.
That's why we added and continued to add key technology focused executives from outside our industry to bring new perspectives to an old way of doing things their expertise in energy has been vital as we forged a new path.
Kenny Dick: Their expertise and energy has been vital as we forge a new path.
Kenny Dick: And I am energized by the potential for us to improve operations, profitably grow the business, and generate attractive returns for our stockholders.
And I am energized by the potential for us to improve operations profitably grow the business and generate attractive returns for our stockholders.
With that as the backdrop, let me share some of the highlights from this morning's earnings release.
Kenny Dick: But that is the backdrop. Let me share some of the highlights from this morning's earnings release.
Kenny Dick: We reported over $345 million in fourth quarter revenue, setting another record, which was up 64% year over year.
We reported over $345 million in fourth quarter revenue setting another record, which was up 64% year over year.
Kenny Dick: Revenue for the year was almost $1.2 billion, which is up over 70% year over year and well above our latest guide.
Revenue for the year was almost $1 2 billion, which is up over 70% year over year and well above our latest guidance.
Kenny Dick: We now have over 12,000 active members growing by over 30% year over year and more than doubling our membership from 2019 and our live legs were up 65% year over year to over 73,000 for 2021.
We now have over 12000 active members growing by over 30% year over year and more than doubling our membership from 2019, and our live legs were up 65% year over year to over 73000 for 2021.
Kenny Dick: I'm extremely proud of these results and the efforts of our entire wheels up team who work tirelessly to serve and care for our customers.
I am extremely proud of these results and the efforts of our entire wheels up team, who work tirelessly to serve and care for our customers.
Kenny Dick: That said I want to be very clear we are fully cognizant of the short term cost we are absorbing to prioritize customer service in a very challenging environment.
That said I want to be very clear, we are fully cognizant of the short term costs. We are absorbing to prioritize customer service in a very challenging environment. We made the conscious decision to invest in our membership, including securing third party capacity and often providing complementary cabin upgrades.
Kenny Dick: We made the conscious decision to invest in our membership including securing third party capacity and often providing complimentary cabin upgrades to compensate for broader supply chain issues including parts maintenance and workforce availability due to the Omicron wave of COVID-19.
To compensate for broader supply chain issues, including parts maintenance and workforce availability due to the omicron wave of COVID-19.
Kenny Dick: To protect service level for our existing customers, we implemented a 90-day fly moratorium from date of joining on most new memberships and marketplace flyers.
To protect service levels for our existing customers, we implemented a 90 day flying moratorium from date of joining on most new memberships and marketplace suppliers.
Kenny Dick: That substantially curtailed the ability of new customers to fly during a seasonally busy fourth quarter and the beginning of 2022. However thanks to our concerted efforts to address supply we were able to ease those restrictions earlier than expected even as most of our competitors have continued with limitations on their programs.
Thats substantially curtailed the ability of new customers to fly during a seasonally busy fourth quarter and the beginning of 2022. However, thanks to our concerted efforts to address supply we were able to ease those restrictions earlier than expected even as most of our competitors that continue with limitations on their programs.
I am very confident.
Kenny Dick: that our focus on customer satisfaction, despite some short-term margin pressures and self-imposed limitations on our growth, was the right decision for our members, customers, and for our company for the long term.
And our focus on customer satisfaction.
By some short term margin pressures and self imposed limitations on our growth was the right decision for our members customers and for our company for the long term.
The reasoning is simple.
Kenny Dick: Our cohort trends continue to highlight an extremely high lifetime customer value. Our core and business memberships on average spend over $80,000 per year with us.
Cohort trends continue to highlight an extremely high lifetime customer value.
Core business memberships on average spend over $80000 per year with us.
Kenny Dick: Their spend is durable, year in and year out, with very strong retention. Even better, our newest customers are spending more on our platform than earlier cohorts. This runs counter to the old marketing axiom that your oldest customers are your best customers. And it's another exceptional proof point for the strength of our demand dynamics and the power of our products and services.
Their spend is durable year end and year out with very strong retention, even better our newest customers are spending more on our platform in earlier cohorts. This runs counter to the old marketing axiom that your oldest customers are your best customers and is another exceptional proof point.
<unk> of our demand dynamics and the power of our products and services.
Kenny Dick: As further proof, our customers continue to make increasingly long-term commitments to Wheels Up. Our prepaid block sales were well north of $500 million for the fourth quarter, up 80% year-over-year, handily beating our previous block sales record.
As further proof.
Our customers continue to make increasingly long term commitments to wheels up.
Our prepaid block sales were well north of 500 million for the fourth quarter up 80% year over year handily, beating our previous block sales record.
Kenny Dick: And this leading indicator continues to be strong in the first quarter.
And this leading indicator continues to be strong in the first quarter.
Kenny Dick: With robust block sales, our deferred revenue balance is well north of $900 million as of year-end. This, along with our strong retention rate, provides us with great revenue visibility and allows us to plan and secure future supply with more favorable economics across our 1P, 2P, and 3P fleets.
With robust block sales, our deferred revenue balance is well north of $900 million.
As of year end.
Along with our strong retention rate provides us with great revenue visibility and allows us to plan and secure future supply with more favorable economics across our one P to P and three-peat beliefs.
Kenny Dick: I don't know of many companies that have the luxury of this type of visibility into the vast majority of their expected 2022 revenue.
Don't know of many companies that have the luxury of this type of visibility into the vast majority of their expected 2022 revenue.
Kenny Dick: All of this demonstrates the true quality of our brand and customer base. That is why we made the decision to absorb margin pressures in favor of investing in the long-term value of our customers.
All of this demonstrates the true quality of our brand and customer base that is why we made the decision to absorb margin pressures in favor of investing in the long term value of our customers.
Kenny Dick: In addition we are making progress with certain recent supply initiatives. For example we are growing our capacity with the acquisition of a lot of air charter which adds 12 incremental tails to our fleet.
In addition, we are making progress with certain recent supply initiatives. For example, we are growing our capacity with the acquisition of <unk> Air Charter, which adds 12 incremental tail to our fleet.
Kenny Dick: It's a great addition to our safety vetted and verified like that program arguably the most in demand category in the industry. I am very excited to report that we have hired more than 150 new wheels up pilots since our November call and added another 40 with a long day as we bolster our supply and continue to deliver exceptional service to our customers.
It's a great addition to our safety vetted and verified light jet program arguably the most in demand category in the industry I am very excited to report that we have hired more than 150, new wheels up pilots since our November call and added another 40 with a launch date as we bolster our supply and continue to deliver exceptional service to.
Our customers.
Kenny Dick: It's a great thrill to welcome so many talented aviators who make what we do possible.
It's a great thrilled to welcome so many talented aviators will make what we do possible.
Kenny Dick: Next, I'd like to take a minute to highlight our planned global expansion.
Next I'd like to take a minute to highlight our planned global expansion over.
Kenny Dick: Over the last year, I've often spoken about natural adjacencies, including new geographies. Our pending acquisition of AirPartner, which is listed on the London Stock Exchange, is a great fit with our growth strategy. It will provide us an agile, asset-light way to extend our platform globally. AirPartner should be accretive to our contribution margin and adjusted EBITDA in year one. It is a strong management team, led by CEO Mark Griffith, that will guide our international
Over the last year, I've, often spoken about natural adjacencies, including new geographies.
Our pending acquisition of Air partner, which is listed on the London stock exchange is a great fit with our growth strategy and will provide us an agile asset light way to extend our platform globally.
Partner should be accretive to our contribution margin and adjusted EBITDA in year. One it has a strong management team led by CEO Mark <unk>.
We will guide our international expansion.
Kenny Dick: Moreover, it gives us a global footprint to leverage for our members and prospective customers whom we expect will increasingly look to travel around the world. We expect to close the acquisition within the next several weeks. Our partner has received shareholder approval and we are waiting final regulatory and court approvals. This will be an exciting new chapter for wheels up.
Moreover, it gives us a global footprint to leverage for our members and prospective customers, whom we expect will increasingly look to travel around the world. We expect to close the acquisition within the next several weeks.
Our partner has received shareholder approval and we are waiting final regulatory and court approvals. This will be an exciting new chapter for <unk>.
Doug.
I also want to provide a quick update on our announcement last year regarding our long term strategic view of urban mobility. We recently began utilizing partner VITAS for certain short range trips during peak periods of true last mile solution.
Kenny Dick: I also want to provide a quick update on our announcement last year regarding our long-term strategic view of urban mobility. We recently began utilizing partner VTOLs for certain short-range trips during peak periods, a true last-mile solution.
Kenny Dick: We have received positive member feedback, and this is an important future feature to support our customers.
We have received positive member feedback and this is an important future feature to support our customers.
Kenny Dick: We see tremendous opportunities where we can invest in our customers, expand our supply, develop our technology-enabled marketplace, and serve as a much larger overall PAM. Our strong balance sheet with significant cash on hand essentially note that strong borrowing capacity is a powerful advantage. Expect us to be opportunistic as we look to deepen our competitive mode.
We see tremendous opportunities, where we can invest in our customers expand our supply develop our technology enabled marketplace and service a much larger overall Tam.
Our strong balance sheet with significant cash on hand, essentially no debt strong borrowing capacity is a powerful advantage.
<unk> us to be opportunistic as we look to deepen our competitive mode.
Speaker Change: In my 20 plus years in private aviation, I've never been more bullish about the opportunity to revolutionize how the industry operates.
In my 20, plus years in private aviation I've never been more bullish about the opportunity to revolutionize how the industry operates.
Speaker Change: We have growing predictable demand in concert with tangible technology initiatives to boost supply streamline our operations and deliver long term attractive returns.
A growing predictable demand in concert with tangible technology initiatives to boost supply streamline our operations and deliver long term attractive returns.
Speaker Change: As always, I'm thankful to our loyal members and customers for continuing to put their trust in us. I would also like to recognize and thank the hard-working people across Wheels Up, whom I'm proud to call my partners.
As always I am thankful to our loyal members and customers. We're continuing to put their trust in US I would also like to recognize and thank the hard working people across wheels up whom I'm proud to call My partners Vinayak.
Speaker Change: Thank you Kenny. It's great to be with all of you today. It can be highlighted. You're confident in our decision to absorb near term margin pressure as it is in the best interest of the company and the customer over the long term. The proof is apparent in the strength of our customer courts and the very early results of our strategic initiatives.
Thank you Kenny.
To move the dollars and today as Kevin highlighted we're confident in our decision to Embraer.
Some margin pressure as it is in the best interest of the company and the customer on the long term.
As a parent and the strength of our customer cohorts in the very early results are.
Significant initiatives.
Speaker Change: I want to provide you some context on my priorities since I assumed the role of the company president in October .
I wanted to provide you some context on my priorities and assume that all of the companies that commenced in October .
Speaker Change: We focused on three essential areas that we believe will drive both short-term improvements and results while unlocking significant potential in our business as we redefine success in our industry.
We are focused on three essential areas that we believe will drive both short term improvements in results, while unlocking significant potential in our business.
We redefine success in our industry.
In order to achieve this unlock we will crust.
Speaker Change: drive operational rigor across our entire organization, especially during this period of rapid growth. Second, align both sides of the supply-demand flywheel to fully capitalize on the current customer and industry trends. And third, continue to invest in critical technology initiatives that extend our relationships with customers and suppliers and cement our first mover advantage as a digital disruptor. I will provide some call out on each.
Operational rigor across our entire organization, especially during this period of rapid growth.
<unk>.
Align both sides of the supply demand flywheel to fully capitalize on the current customer and industry trends and card <unk>.
The interest in critical technology initiatives, and external relationships with customers and suppliers and cement our first more advantage of the digital et cetera.
Provide some color on each plus.
Speaker Change: First is our focus on operational rigor. As WeSupp has grown both organically and through acquisition, the need for data-driven decision-making is greater than ever. To help us make the right decisions quickly, we're developing a single operating system across the company.
Plus our focus on operational rigor as lease up has grown both organically and through acquisition.
Need for data driven decision, making is there anything than ever to help.
Let's make the right decisions quickly and developing a singular operating system across the company simply put this is that will lead to rapidly share information aligned priorities and organizational discipline as we continue to scale, the <unk> structure and approach to decision, making without sacrificing speed and giving them a single.
Speaker Change: Simply put, this is our way to rapidly share information, align priorities, and instill organizational discipline as we continue to scale. It provides a more structured approach to decision making without sacrificing speed and gives us a single source of growth and a common vocabulary across all our metrics. This in turn makes us more attuned and responsive to the drivers of the business and more nimble in our execution.
So sector authentic Commonwealth capability across all of our metrics missing tongue makes us more acute and responsive to the drivers of the business and more nimble in our execution.
Speaker Change: Another key element to operational success is optimizing and consolidating our multiple operating certificates. These legacy structures, primarily the product of previous acquisitions, contribute significant inefficiencies to an already complex operating framework. Rationalizing our operating certificates can improve our margins and the customer experience. We are attacking this in three phases.
Another key element to operational success is optimizing and consolidating over multiple operating significance. These legacy structures, primarily a product of previous acquisitions contribute significantly inefficiency.
Complex operating framework.
<unk> of our operating certificates and improve our margins and the customer experience.
Backing this increase phases.
Speaker Change: To begin, we are optimizing our global schedule across our six operating certificates. Until recently, we would take all our bookings and manually divide the demand across each certificate.
To begin optimizing of our global scale across our six operating certificates until recently, we would take all of our bookings and manually be wide, but demand across the syndicate.
Speaker Change: It was time-consuming, human capital intensive, and simply does not scale, especially when factoring in delays or last-minute issues.
It was time consuming human capital intensive and simply does not scale, especially when factoring in delays are locked in at issue.
This is <unk>.
Speaker Change: We recently launched the first version of a global scheduling system to manage schedules across all of our certificates in a unified manner. We can then use our optimization software to allocate this demand in the most efficient way and see our cost savings in real time.
Recently, we launched the first tuition upon global scheduling system to manage <unk> across all of our certificates in a unified manner, we can.
And then use our optimization software to allocate this demand in the most efficient way.
Cost savings in real time.
Speaker Change: Next, we are on track to migrate all our certificates to run entirely on UpFMS, our own proprietary fleet management system, by the end of April .
Next we are on track to migrate all of our certificates to running entirely on Fms.
Our own proprietary data management system by the end of April .
Speaker Change: As you may recall, we began this process last year and spent the last several months on important enhancements to the platform before rolling it out to the rest of our fleet.
As you May recall, we began this process last year and spent the last several months on important enhancements to the platform before rolling it out to the rest of our fleet.
Speaker Change: It is now much faster and more responsive and allows us to better optimize fleet schedules and maintenance events.
It is now much faster and more responsive and allowing us to better optimize fleet schedules and maintenance events.
Speaker Change: This will offer significant operational advantages to better manage your fleet and maximize revenue.
This will allow for a significant operational advantages to better manage our fleet and maximize revenue.
Speaker Change: Finally, we have a team focused on consolidating our entire first-party fleet onto one FAA operating certificate.
Finally, we have a team focused on consolidating our entire first party fleet under one.
Operating certificates.
Speaker Change: It is a critical step that will allow all of our pilots to be scheduled more flexibly, rather than being tied to a specific certificate. This move along will significantly reduce the complexity and cost of our operations, improve margins, and give us better flexibility to meet customer needs.
It is a critical step that will allow all of our pilots to reschedule more flexibly rather than being tied to a specific significant this morning, along with significantly radios and complexity and cost of our operations improved margins.
The flexibility to meet customer needs.
Speaker Change: Our second focus area is to align the supply and demand fly well that will drive our marketplace ensuring we have the right supply strategy including optimal first party supply is critical to improving our contribution margins.
Our second focus area is to align the supply and demand flywheel that will drive our marketplace, ensuring we have the right supply strategy, including optimal first party supply is critical to improving our contribution margins.
Speaker Change: Having the right plane in the right place at the right time requires a precise series of input factors to be executed correctly.
Having the right plan and the right place at the right time requires precise series of input practice to be executed correctly.
Speaker Change: This includes having aircraft ready to fly, assigning the right pilot.
This includes having aircraft, but I need to fly assigning the right pilots.
Speaker Change: the right set of routes on a plane to maximize yields and deploying a system to orchestrate all of this quickly and efficiently.
The right set of routes on our plan to maximize yields and decline in the system to orchestrate all of this quickly and efficiently.
Speaker Change: Eric will provide more context on our overall fleet approach, so let me focus on how we are maximizing the availability of our first party fleet, namely pilots and maintenance.
Eric will provide more context on our oral fleet approach. So let me focus on how we are maximizing the availability of our first party fleet, namely pilots in maintenance.
Speaker Change: As I mentioned last quarter, pilot and maintenance technician shortages created a cascading effect on our margins, as we made the deliberate decision to secure capacity from third-party operators at a premium and provide pre-cabin upgrades to ensure we best served our customers.
As I mentioned last quarter pilot and maintenance technician shortages created a cascading effect on our margins as we made the deliberate decision to secure capacity from third party operators at a premium and so wide pre cabin upgrades to ensure we backfill that with customers.
Speaker Change: I'm pleased to say that we are in a much better position today. As Kenny mentioned, we have hired more than 150 pilots since November and are on pace to hire over 200 pilots by the end of the first quarter, well ahead of plan. It is important to note about half of these hires still need to go through extensive training before they fly a revenue-generating flight for us. That said, pilot hiring is a leading indicator of our ability to efficiently manage higher demand.
I am pleased to say that we are in a much better position today as Kenny mentioned, we have hired more than 150 pilots since November and are on pace to hire over 200 pilots by the end of the first quarter well ahead of plan.
It is important to know about half of these higher Tony to go through an extensive training before they fly a revenue generating flight for us that said pilot hiring is a leading indicator of our ability to efficiently manage higher demand and.
Speaker Change: a deep roster of pilots to reduce instances wherever aircraft availability to fly without necessary crew, which has been a challenge for us in the recent quarter.
A deeper set of pilots learning instances.
Aircraft availability to fly without the necessity crew.
Being a challenge for us in the recent Congress.
Speaker Change: We have also focused on pilot hiring and retention, with the introduction of our Aircrew 360 initiative. Through this initiative, we revamped pilot compensation, including equity grants and Industry First, as well as improved benefits, career progression plans, and lifestyle enhancements to our pilots.
We are also focused on final tightening intervention for the introduction of our Air crew 360 initiative.
This initiative.
Graham pilot compensation, including equipment grants and industry trust as well as improved benefits career progression plants and lifestyle enhancements to our pilots.
Speaker Change: Additionally, our partnership with Delta Airlines creates an exciting opportunity for career advancement for pilots who aspire to transition from flying private to commercial aviation and vice versa.
Additionally, our partnership with Delta Airlines pay into an exciting opportunity for creon and <unk>.
Pilot to aspire to transition from flying private to commercial aviation and likes of Russia.
Speaker Change: Our pilots are some of the most highly trained and dynamic women and men in the industry. And it's how we represent our front line with members and customers. It is an easy decision to invest in them.
Our pilots are some of the most highly trained and dynamic women and men in the in this case and it's how we represent our frontline with members and customers.
An easy decision to invest in them.
Speaker Change: Turning to maintenance, one of our key challenges is our reliance on third-party providers that are exceptionally backlogged with the unprecedented demand in the industry and labor shortages as a result of the pandemic. Shortages have affected our own hiring of maintenance techs as well. As with pilots, we are building out an MX360 program with the goal of hiring more than 100 technicians over the course of the year.
Turning to maintenance one of our key challenges is our reliance on third party providers that are exceptionally backlog.
The unprecedented demand in the industry and labor shortages as a result of the pandemic shortages have affected our own hiring of maintenance text as well.
Pilots, we are building out and act 360 program.
The goal of filing more than 100 technicians over the course of the year.
Speaker Change: It is important because at our own maintenance facilities where we control the schedule and the priority of the work performed we are able to complete the service in less time and at a lower labor cost.
It is important because at our own maintenance facilities.
Control the schedule and the priority of the work performed we are able to complete the service in less time and at a lower labor costs.
Speaker Change: Many of these maintenance techs will be deployed to increase our mobile service unit capacity by 50 percent this year, which provides us more options and faster response time to address unscheduled maintenance at remote airports. Meanwhile, we are working diligently to increase our parts inventory so that we can improve our return to service time.
Many of these maintenance techs will be deployed to increase our mobile service unit capacity by 50% this year.
Which provides us more options and faster response times to address unscheduled maintenance and remote airports. Meanwhile, we are working diligently to increase our parts inventory.
We can improve our return to service times.
Speaker Change: I'm confident that we'll quickly execute on these important hires, just as we did with our pilots, which will further improve aircraft availability.
I'm confident that we will quickly execute on these important highest just as we did with our pilots we can further improve aircraft availability.
Speaker Change: We are also working to improve supply in our acid light second and third party plates.
We're also working to improve supply asset light second and third party fleets.
Speaker Change: Our aircraft management customers have increasingly recognized that our strong demand generation engine allows them to monetize their aircraft through charter when they could otherwise sit idle. Aircraft owners can take advantage of our new charter guarantee program which provides predictable revenue to the owner in exchange for specific time increments of aircraft availability. This win-win proposition will drive significant capacity growth in our second party fleet this year and beyond.
Our aircraft management customers have increasingly recognized that it was strong demand generation engine allows them to monetize that aircraft for the charter and liquid otherwise sit idle aircraft owners can take advantage of for new charter guarantee program, which provides predictable revenue to the owner and exchange with specific time increments.
Of aircraft availability.
Win win proposition will drive significant capacity growth second party fleet this year and beyond.
Speaker Change: Similarly, our third party fleet is a vital component of our total offering, which is why we have committed more to third party capacity with longer term GRPs.
Similarly, our third party crude is a widely component of October offering, which is why we are committing more to third party capacity with longer term drp's.
Speaker Change: We are working to allow our third party partners to tap into our optimization technology for their needs.
We are working to allow our third party partners to tap into our optimization technology on their fleets.
Speaker Change: This will improve their operations and help us better integrate the supply into our system.
This will improve their operations and help us better integrate their supply into.
Systems were all.
Speaker Change: We're also constantly improving our forecasting system to anticipate demand at a more granular level, which will help us predict when we will need ad hoc third-party supply and plan budgets and schedules accordingly.
Also constantly improving our forecasting system to anticipate demand at a more granular level we.
It will help us predict when we will need ad-hoc third party supply and planned budgets and schedules accordingly.
Speaker Change: while we are laser focused on supply and not neglecting the demand part of the flywheel. It is clear that we have a great product market fit as evidenced by our growth in new members and continued spending by existing members. In fact our newer cohort of members are spending earlier and spending more than our older member cohorts which remain incredibly healthy.
While we are laser focused on supply and not neglecting the demand part of the flywheel.
It's clear that we have a great product market fit.
Evidenced by our growth in new members and continued spending by existing members and attract new cohort of members are spending earlier and spending more than all of our member cohorts, which remain incredibly healthy.
Speaker Change: We recently deployed a customer data platform which provides a unified view of all customer experiences, including flights flown, issues experienced, predicted lifetime value, propensity to churn, and a priority score, among other things.
We recently deployed a customer data platform, which provides a unified view of our customer experiences, including flights flown issues experienced committed lifetime value propensity to churn and a priority score among other things.
Speaker Change: We can now leverage this system across our member services and our sales and account management teams to improve customer experience and drive better retention. This is the beginning of a sophisticated CRM system that reflects and scales with the business over time. As with any marketplace, pricing is a critical component of driving demand.
We can now leverage this system across our member services and our sales and account management teams to <unk>.
<unk> customer experience and drive better retention. This is the beginning of the sophisticated CRM system, better flex and scale with the business over time as with any marketplace pricing is a critical component of driving demand.
Speaker Change: We are developing a pricing system that will enable us to drive demand while also increasing the utility of our fee.
Developing a pricing system that will enable us to drive demand, while also increasing the utility of our feet per.
Speaker Change: For example if you notice that there are 10 flights into Florida in the evening and there are 20 flights out of Florida the next morning you can use this mismatch as an opportunity to drive demand by offering slightly discounted flights to customers instead of just repositioning 10 empty non-revenue generating aircraft.
For example, if the.
I noticed that there are 10 flights into Florida in the evening and then 20 flights out of Florida. Another next morning, beginning of this mismatch as an opportunity to drive demand.
Slightly discounted flights to customers and sort of industry positioning 10, MTI non revenue generating aircraft.
Speaker Change: Pricing is a critical area of focus for us in 2022. Based on my experience in other marketplaces, pricing is a meaningful lever to shape demand and improve efficiency and margins, in addition to improving customer retention.
<unk> is a critical area of focus for us in 2022 based on my experience in other marketplaces, rising as a meaningful liver to shape demand and improve efficiency and margins. In addition to growing customer attention.
Speaker Change: our last focus area with continued investment in our technology initiative.
Our last focus area with continued investment in technology initiatives.
Speaker Change: As Kenny mentioned, private aviation is saddled with outdated, manual approaches that simply cannot scale to meet the evolving customer demands. We believe our technology solutions, when complete, will be a massive competitive advantage, particularly when coupled with our radical devotion to the customer.
Kenny mentioned.
Deviation Italian unbeaten manual approaches that simply cannot scale to meet the evolving customer demands. We believe with technology solutions when complete will be a massive competitive advantage, particularly when coupled with our fanatical devotion to the customer.
Speaker Change: In the coming weeks, we will launch the newest version of our mobile app.
In the coming weeks, we will launch the newest version of our mobile App, we invested in this area.
Speaker Change: invested in this area where we can constantly improve the user experience of our members and customers in a flexible and highly scalable way. The new app is extremely user-friendly with a streamlined user interface that allows for customization with less complexity. We're launching dozens of new and enhanced features, including many that will automate customer interactions at lower cost, while simultaneously providing a better customer experience and improving demand conversion.
And constantly improve the user experience for our members and customers and a flexible and highly scalable way.
Our new App is extremely user friendly with a streamlined user interface that allows for customization and less complexity.
Launching dozens of new and enhanced features including many of the Columbia customer interactions at lower cost, while simultaneously, providing a better customer experience and improving demand kind of Williams.
All of the initiatives that we mentioned today for the building blocks of core technology enabled marketplace. The company cannot have an automated marketplace without robust and reliable data.
Speaker Change: All of the initiatives that are mentioned today are the building blocks of our technology-enabled marketplace. A company cannot have an automated marketplace without robust and reliable data.
Speaker Change: One cannot have robust data with disparate systems that are not connected. Connecting all these systems through hardened APIs over a service-oriented architecture on a modern cloud data infrastructure will enable us to rapidly build features and continue to improve the customer experience and convert more demand in our marketplace. Let me provide some context to illustrate our
One cannot have robots with disparate systems that are not connected connecting all these systems to harden Apis.
Service oriented architecture on a modern cloud data infrastructure will enable us to rapidly build features and continuing to improve the customer experience and convert more demand in our marketplace.
We provide some context to illustrate our vision in action.
Speaker Change: Last quarter, I gave a simple example of how the industry is inefficient by highlighting two customers departing from the same airport that today would be served by two different aircraft. This inefficiency has
Last quarter I gave you a simple example of how the industry is inefficient by highlighting two customers departing from the same endpoint that today would be served by two different aircraft.
This inefficiency happens far too often.
Speaker Change: In the future, the platform we are developing will recognize the overlap and provide incentives for either customer to adjust their departure times, enabling us to serve both customers with one aircraft.
In the future the platform and developing but recognize the overlap and provide incentives for either customer.
The phosphate clients, enabling us to serve both customers with one aircraft.
Speaker Change: It sounds easy enough. The sheer complexity and amount of instantaneous computations required to do this at scale can only be achieved by a software-enabled platform, the one that we are building.
Easy enough the sheer complexity and the amount of instantaneous competitions.
Quietly do this at scale can only be achieved by a software enabled platform. The one that we are building.
That is why we are focused on three key areas operational rigor supply and demand and continued technology investments. We believe they will not only drive contribution margins, but more importantly, it will improve our customer experience.
Speaker Change: That is why we are focused on these three key areas operational rigor supply and demand and continued technology investments. We believe they will not only drive contribution margins but more importantly they will improve our customer experience.
Speaker Change: Let me conclude by saying we have an incredible foundation as a leading demand generator in private aviation today. We are extending that advantage to the supply side of our business with our operational and technology initiative.
Let me conclude by saying, we have an incredible foundation as a leading demand generator in private aviation today, and we're extending that advantage to the supply side of our business with our operational and technology initiatives.
Speaker Change: Microsoft has striking similarities with the other marketplaces I've been involved with at the earlier stages of their life cycles. All of them had very little automation to start with, and there was no shortage of transitory margin challenges. However, to a continuous focus on technology and operational discipline, they built platforms that gave them a competitive advantage and allowed them to turn the corner and show strength in their business model.
Lisa has striking similarity with the other marketplaces have been involved with in the earliest stages of their lifecycle.
All of them had very little Artemis and to start with and there was no shortage of transitory margin challenges.
Our continuous focus on technology and operational discipline.
<unk> platforms that give them a competitive advantage and allow them to turn the corner and showed strength in their business model.
Speaker Change: Wheelsup is in a very similar position today and have the utmost confidence in our future. I look forward to sharing our progress with you over the course of the year. With that, let me turn it over to Eric.
When something is in a very similar position today and have the utmost confidence in our future and look forward to sharing our progress with you over the course of the year with that let me turn it over to Eric.
Eric: Thank you, Vinayak. Hello, everyone. As Kenny noted, we are very pleased with our strong revenue growth, with fourth quarter revenue growing 64% year over year to $345 million, and full year revenue jumping 72% to $1.194 billion.
Thank you Vinayak Hello, everyone. As Ken noted, we are very pleased with our strong revenue growth with fourth quarter revenue growing 64% year over year to $345 million and full year revenue jumping, 72% to $1 194 billion.
Eric: That strong performance was due to the incredible efforts of our team to secure supply and service our customers during a challenging period for the industry.
That strong performance was due to the incredible efforts of our team to secure supply and service our customers during a challenging period for the industry.
Providing more detail on revenue our membership revenue grew 38% year over year in the quarter and 27% for the full year.
Eric: Providing more detail on revenue, our membership revenue grew 38% year-over-year in the quarter and 27% for the full year.
Eric: As we've discussed previously, we believe our membership revenue is highly visible and largely recurring, especially since our retention rates continue to remain strong at approximately 80 percent for core and business members overall, and approximately 90 percent for core and business members who purchase prepaid blocks.
As we've discussed previously we believe our membership revenue is highly visible and largely recurring.
Especially since our retention rates continue to remain strong at approximately 80% for core business members overall and approximately 90% for core business members, who purchase prepaid blocks.
Eric: In the fourth quarter, we added 665 net new members, with active members growing 31% year over year.
In the fourth quarter, we added 665 net new members with active members growing 31% year over year.
Eric: our core business offerings with their guaranteed availability and cap rates across all asset classes.
Our core business offerings with their guaranteed availability and cap rates across all asset classes.
Eric: continue to resonate with customers, even as we raise certain cap pricing tiers in November .
You need to resonate with customers, even as we raise certain cap pricing tiers in November .
Eric: Those membership peers were a key driver of growth in the quarter, along with the continued success of our American Express partnership.
Those membership tiers were a key driver of growth in the quarter along with the continued success of our American Express partnership.
Eric: As Kenny mentioned, we implemented a temporary moratorium on flying for certain new members and pay-as-you-go flying during the fourth quarter so that we could prioritize our supply to service our existing members.
As Kenny mentioned, we implemented a temporary moratorium on flying for certain new members and pay as you go flying during the fourth quarter. So that we could prioritize our supply to service our existing members.
Eric: I'm pleased to say that while there was a temporary headwind in adding prospective members, overall membership trends and prepaid blocks remained strong throughout the moratorium.
I am pleased to say that while there was a temporary headwind and adding prospective members overall membership trends in prepay blocks remained strong throughout the moratorium.
Eric: Also, new membership sales have picked up following the lifting of the moratorium in February .
Also new membership sales have picked up following the lifting of the moratorium in February .
Turning to flight revenue.
Eric: Flight revenue was up 66 percent year over year for the quarter and up 76 percent for the full year.
Flight revenue was up 66% year over year for the quarter and up 76% for the full year.
Eric: Live flight lines were up 63% year-over-year in the quarter and 65% for the full year.
Lifeflight legs were up 63% year over year in the quarter and 65% for the full year.
Eric: We continue to see strong leisure demand and the beginnings of a pickup in business and international travel.
We continue to see strong leisure demand in the beginnings of a pickup in business and international travel.
Eric: We are pleased with this performance, even though supply chain constraints limited our ability to address potential significant demand from Connect and non-members through our marketplace.
We're pleased with this performance, even though supply chain constraints limited our ability to address potential significant demand from connect and non members through our marketplace.
Eric: a live flight leg growth of 63%, significantly outpaced North American private aviation flight leg growth of about 45% for the year, highlighting our ability to gain share.
Our lives slight lead growth of 63% significantly outpaced North American private aviation slight light growth of about 45% for the year, highlighting our ability to gain share.
Eric: Just as a reminder to you, industry metrics allocate all of our 3P flying to those third-party operators we utilize, even though those flights are actually for our customers.
Just as a reminder to you industry metrics allocate all of our three P. Flying to those third party operators, we utilized even though those flights are actually for our customers.
Flight revenue per Lifeflight lag with $12428 for the quarter. This was up slightly year over year. Please.
Eric: Flight revenue per live flight leg was $12,428 for the quarter. This was up slightly year-over-year. Please keep in mind this metric is a function of various factors, including pricing, stage length, cabin mix, and peak versus off-peak fly.
Please keep in mind. This metric is a function of various factors, including pricing stage length cabin mix and peak versus off peak flying.
Eric: While the mix of those components varies from quarter to quarter, we expect to show an increasing benefit over time from the price increases that we announced last November , particularly as the prepaid blocks that locked in prior rates are utilized over the course of the year.
While the mix of those components varies from quarter to quarter, we expect to show an increasing benefit over time from the price increases that we announced last November , particularly at the prepay blocks that locked in prior rates are utilized over the course of the year.
Eric: Prepaid block sales were incredibly strong at $540 million in the quarter, up 80% year-over-year. This provides us with great visibility.
Prepaid block sales were incredibly strong at $540 million in the quarter up 80% year over year.
This provides us with great visibility for the year ahead.
Eric: also block sales have continued to be strong so far this quarter even with the recent cap rate increases
Also block sales have continued to be strong so far this quarter, even with the recent cap rate increases.
Eric: Currently, over 60% of our core members have a prepaid block.
Currently over 60% of our core members have a prepay block.
Eric: Switching to aircraft management our aircraft management revenue grew 69 percent year over year for the fourth quarter and 70 percent for the full year driven by higher flight volume by owners and member charter usage.
Switching to aircraft management, our aircraft management revenue grew 69% year over year for the fourth quarter and 70% for the full year driven by higher flight volumes by owners and remember charter usage.
Eric: We managed approximately 150 aircraft as of the end of the fourth quarter, which is down slightly from the prior quarter.
We manage approximately 150 aircraft at the end of the fourth quarter, which is down slightly from the prior quarter.
Eric: As we mentioned on previous calls, we are continuing to restructure certain legacy management contracts that are not commercially advantageous to us.
As we mentioned on previous calls we are continuing to restructure certain legacy management contracts that are not commercially advantageous to us.
Eric: There were about 15 of those contracts remaining at the end of the year, down from about 20 at the end of the third quarter.
About 15 of those contracts remaining at the end of the year down from about 20 at the end of the third quarter.
Our last revenue category as other revenue.
Eric: Other revenue is a small percentage of our total revenue. It represents revenue earned from software, fixed base operations, or FBO, maintenance, aircraft sales, and special missions, including defense. Now, let me
Other revenue is a small percentage of our total revenue represents revenue earned from software fixed based operations for FPL maintenance aircraft sales and special missions, including defense.
Now, let me address cost of revenue and margin.
Eric: Our strategy is to optimize utility and efficiency across our entire 1P, 2P, and 3P fleets. Our goal is to use technology to automate scheduling so that we use the right plane and the right place at the right time to minimize repositioning lags and improve profitability.
Our strategy is to optimize utility and efficiency across our entire lumpy tupi and <unk> fleets. Our goal is to use technology to automate scheduling. So that we use the right plan and the right place at the right time to minimize repositioning legs and improve profitability.
Eric: The process improvements, technology, and automation initiatives that Vinayak described are expected to be a significant driver of margin improvement in the future. That's our goal, but it's clearly taking more time in this market environment.
The process improvements technology and automation initiatives that I've described are expected to be a significant driver of margin improvement in the future Thats our goal, but it's clearly taking more time in this market environment.
Eric: As we mentioned in our last quarterly call, we did expect unprecedented demand coupled with similarly unprecedented industry labor, supply and cost pressures to impact our 1P utility inefficiency and therefore increase our operating costs in the fourth quarter.
As we mentioned on our last quarterly call. We did expect unprecedented demand coupled with similarly unprecedented industry labor supply and cost pressures to impact our <unk> utility inefficiency and therefore increase our operating costs in the fourth quarter.
Eric: In addition, to serve some members, we depended on more expensive third-party supply and absorbed a higher level of complimentary cabin class upgrade.
In addition to service our members we dependent on more expensive third party supply and absorbed a higher level of complementary cabin class upgrades.
Eric: Due to all those factors, our adjusted contribution margin fell to 1.3% in the quarter, which is generally in line with the expectations we articulated on the third quarter call.
To all of those factors are adjusted contribution margin fell to one 3% in the quarter, which is generally in line with the expectations, we articulated on the third quarter call.
Eric: So now let me take a moment to update you on our progress on the tactical initiatives we also laid out last quarter.
So now let me take a moment to update you on our progress on the tactical initiatives. We also laid out last quarter.
Eric: First, as the Knight mentioned, we're in a much better position with our pilot numbers, and we are now applying lessons learned from our pilot initiatives to improve our maintenance capabilities. As the pilots complete training, which takes more time in this environment given high demand for training slots, and our in-house maintenance capabilities increase, we should be in a position to significantly improve the utilization of our existing aircraft.
First is and I mentioned, we're in a much better position with our pilot numbers and we are now applying lessons learned from our pilot initiatives to improve our maintenance capabilities as.
As the pilots complete training, which takes more time in this environment given high demand for training slots.
And our in house maintenance capabilities increase we should be in a position to significantly improve the utilization of our existing aircrafts.
Eric: We're also looking to add more 1P capacity to acquisition and individual aircraft purchases. I'll provide more details on that in a minute.
We're also looking to add more one peak capacity through acquisition and individual aircraft purchases I'll provide more details on that in a minute.
Second.
Eric: We will start seeing a more meaningful impact in the upcoming quarters from pricing, particularly from the 13 percent increase on cap rates for King Airs and 8 percent increase for light jets that we implemented in early December .
We will start seeing a more meaningful impact in the upcoming quarters from pricing, particularly from the 13% increase on cap rates for King airs and 8% increase for light jets that we implemented in early December .
Eric: While existing pay-as-you-go members generally saw price increases in December , price increases for members who purchased prepaid blocks before December will phase in over time as their blocks are utilized.
While existing pages members generally saw price increases in December price increases for members, who purchase prepaid blocks before December will phase in over time as our blocks are utilized.
Eric: Also, we just announced a $295 to $895 per hour fuel surcharge, depending on cabin class, on substantially all flights for the first time in our history due to the spike in fuel costs.
Also we just announced a $295 to $895 per hour fuel surcharge, depending on cabin class.
Substantially all flights for the first time in our history due to the spike in fuel costs.
Eric: This fuel surcharge will commence on April 9th and apply to prepaid block flights as well.
This fuel surcharge will commence on April nine and apply to prepay blocks flights as well.
Eric: Third, we are having success driving more managed charter hours. Hours that our members fly on our managed tails out of our 2P fleet.
Third.
We're having success driving more managed charter hours hours at our members fly on our managed sales out of our <unk> fleet.
Eric: We expect significant growth in our 2P flights in 2022 due to an expected increase in charter hours per managed aircraft, aided by the launch of our charter guarantee program and a healthy pipeline of charter-friendly fleet additions.
We expect significant growth in our <unk> flights in 2022 due to an expected increase in charter hours per managed aircraft aided by the launch of our charter guarantee program and a healthy pipeline of charter friendly Fleet addition.
Eric: Fourth, we continue to expand the utilization of long-term GRPs, or Guaranteed Rate Program, to augment our fleet capacity to help us best serve our customers.
Fourth we continued to expand the utilization of long term <unk> are guaranteed rate program to augment our fleet capacity to help us best serve our customers.
Eric: Our visibility of flight demand allows us to plan ahead and more confidently lock up supply earlier.
Our visibility to flight demand allows us to plan ahead, and more confidently lockup supply earlier.
Eric: Recently, we have started to reduce free cabin class upgrades and the need for last-minute 3P supply, which should allow us to improve our margin on 3P aircraft.
Recently, we have started to reduce fee cabin class upgrades and the need for last minute <unk> supply, which should allow us to improve our margin on <unk> aircrafts.
Eric: fifth, we are almost halfway to our goal of hiring 50 software engineers, most of whom will be based in our new technology center in Seattle.
Fifth we are almost halfway to our goal of hiring 50 software engineers.
Most of whom will be based in our new technology Center in Seattle.
Eric: With pricing, process improvements, additional supply, and technology initiatives, we have many levers that will help us improve adjusted contribution margin in the second half of the year.
With pricing process improvements additional supply and technology initiatives, we have many levers that will help us improve adjusted contribution margin in the second half of the year.
Switching to Opex.
Eric: We continue to see a lot of opportunities to grow and we'll continue to invest in sales and marketing. So we expect those expenses will come down as a percentage of revenue over time.
We continue to see a lot of opportunities to grow and will continue to invest in sales and marketing that we expect those expenses will come down as a percentage of revenue over time.
Eric: In terms of research and development, technology is a key investment area for us.
In terms of research and development technology is a key investment area for us as.
Eric: part of the significant hiring of software engineers. I mentioned we're having great success and talented technologists from leading companies. We expect to continue these efforts. Capitalized
As part of the significant hiring of software engineers I mentioned.
Having great success, adding talented technologists from leading companies.
Spect to continue these efforts.
Capitalized software is an important component of our capex.
Eric: General and administrative expenses were unusually high in the fourth quarter due to the timing of expenses and employee costs.
General and administrative expenses were unusually high in the fourth quarter due to the timing of expenses and employee costs.
Eric: In 2022, we expect to get more leverage in our G&A spend as a percentage of revenue.
And 2022, we expect to get more leverage on our G&A spend as a percentage of revenue.
Eric: This is due in part to a structuring program we began recently to streamline our corporate overhead and other costs.
This is due in part to our restructuring program, we began recently to streamline our corporate overhead and other costs.
Eric: The annual savings from the cuts made late in the first quarter are expected to be in excess of $10 million on an annual run rate basis.
The annual savings from the cuts made late in the first quarter are expected to be in excess of $10 million on an annual run rate basis.
Eric: When you put things all together, the adjusted EBIT came in at a negative $46.3 million for the quarter and a negative $87.4 million for the year, which was within our most recent guidance range. Cash flow from operations.
When you put things altogether adjusted EBITDA came in at a negative $46 $3 million for the quarter and a negative $87 4 million for the year, which was within our most recent guidance range.
Cash flow from operations were very strong.
Eric: coming in at $279 million for the quarter and $126 million for the year.
Coming in at $279 million for the quarter and $126 million for the year.
Eric: that strength was due primarily to the strong prepaid block sales we have discussed.
That strength was due primarily to the strong prepaid block sales we have discussed.
Eric: which importantly allows us to operate with negative working capital.
Which importantly allows us to operate with negative working capital.
Eric: Kindly keep in mind, while block sales have been very strong, there is seasonality to those sales.
Keep in mind, while block sales have been very strong there is seasonality to those sales.
Capital expenditures, including capitalized software was $28 million for the year.
Eric: Capital expenditures, including capitalized software, was $28 million for the year.
Eric: coming in at the lower end of our recent guidance range due to timing.
Coming in at the lower end of our recent guidance range due to timing.
Eric: Almost half of our capex was capitalized software.
Almost half of our Capex is capitalized software.
Eric: Now we'd like to discuss our fleet strategy and certain other plans for 2022. Our 1P fleet is a mix of owned and leased aircraft.
Now I would like to discuss our fleet strategy and certain other plans for 2022.
Our <unk> fleet is a mix of owned and leased aircraft.
Both of which are included in our balance sheet.
Eric: When we evaluate adding an aircraft we have various options to consider. We can either buy it, lease it, finance it or even sell it into our managed fleet over time for our charter usage.
When we evaluate adding an aircraft we have various options to consider we can either buy it lease it finance it or even sell it into our managed fleet over time for our charter usage.
Eric: For example, recently paid $65 million tax time.
For example, recently paid $65 million of Textron.
Eric: to 32 mid and super mid citation aircraft that were previously on our balance sheet as operating leases with a $10 million annual lease cost.
The 32 mid and Super mid Citation aircraft that were previously on our balance sheet as operating leases with a $10 million annual lease costs we.
Eric: We have been operating these aircraft, but many of them branded with blue and white painted tail.
We have been operating these aircraft, but many of them branded with blue and white painted tail.
Eric: We could have entered into a third-party sale-leaseback transaction, with a third party on similar terms. But given our task position, we elected to purchase these aircraft outright, and we'll consider potential alternative financing options over time, as needed.
We could have entered into a third party sale leaseback transaction with a third party on similar terms, but given our cash position we elected to purchase these aircraft outright and we will consider potential alternative financing options over time as needed.
We're also looking to further bolster our <unk> fleet.
Eric: Having scheduled control of aircraft in a strong demand environment is valuable. That's why we purchased the Lante, which leases 12 highly sought after light jets. And we will continue to evaluate other
Having schedule control of aircraft and a strong demand environment as valuable that's why we purchased <unk>, which leases 12 highly sought after light jets.
And we will continue to evaluate other acquisition candidates.
Eric: We also see opportunities to strategically use our aircraft brokerage purchase and sale capability.
We also see opportunities to strategically use our aircraft brokerage purchase and sale capability.
Eric: Some aircraft may be purchased outright for our fleet. For other aircraft, we believe we are in a great position to sell them to future owners who can recognize the tax benefits from the accelerated depreciation. Ideally, they can either...
Some aircraft maybe purchase outright for our fleet for other aircraft. We believe we are in a great position to sell them to future owners, who can recognize the tax benefits from the accelerated depreciation.
Ideally they can either lease them back to us.
Eric: We may manage these aircraft, but the owner's committing to allow us to use their aircraft for our charter customers, which we view as a
We may manage these aircrafts with owners committing to allow us to use their aircraft for our charter customers.
Which we view as a win win proposition.
Eric: Due to our increased brokerage capabilities, we're adding aircraft to our balance sheet as assets held for sale.
Due to our increased brokerage capabilities, we're adding aircraft to our balance sheet as assets held for sale with.
With an expected short term holding period.
Eric: We started doing this during the fourth quarter with $18 million in aircraft held for sale as of the end of the year.
We started doing this during the fourth quarter with $80 million aircraft held for sale as of the end of the year.
Eric: total capital spending for 2022 is expected to be approximately $125 million.
And total capital spending for 2022 is expected to be approximately $125 million.
Eric: That includes what we consider normal capital spending of $60 million for purchased aircraft, capitalized software, etc., as well as the $65 million spent for the Textron aircraft purchase in the first quarter.
That includes what we consider normal capital spending of $60 million for purchased aircraft capitalized software et cetera, as well as the 65 million spent for the Textron aircraft purchase in the first quarter.
Eric: which we view primarily as a financing decision of previously leased and operated aircraft.
We view, primarily as a financing decision a previously leased and operated aircrafts.
Eric: Free cash flow, defined as cash flow from operations, less total capital expenditures, including capitalized software, is also very strong, coming in at $267 million for the fourth quarter and $98 million for the full year.
Free cash flow defined as cash flow from operations less total capital expenditures, including capitalized software was also very strong coming in at $267 million for the fourth quarter and $98 million for the full year.
Eric: Due to that strong free cash flow, a year-end wheels up at a very healthy balance sheet with cash and cash equivalents of $784 million and essentially no indebtedness.
Do that strong free cash flow a year and yields up had a very healthy balance sheet with cash and cash equivalents of $784 million and essentially no indebtedness.
Eric: Let me turn now to our guidance, which does not include any pending or potential acquisitions, including your partner.
Let me turn now to our guidance, which does not include any pending or potential acquisition, including air partner.
Eric: Looking at 2022, given the strong demand we are seeing and the visibility provided from the strong prepaid block sales and resulting $935 million of deferred revenue as of December 31, 2021, we expect revenue to be in the range of $1.35 billion to $1.42 billion for the year.
Looking at 2022, given the strong demand we are seeing and the visibility provided from our strong prepaid block sales and resulting $935 million of deferred revenue as of December 31, 2021, we expect revenue to be in the range of $135 billion.
To $142 billion for the year.
Eric: From a seasonality perspective, typical industry trends pre-COVID had been that Q1 and Q2 are similar from a demand perspective, as are Q3 and Q4 compared to each other, with demand slightly stronger in the back half of the year compared to the first half.
From a seasonality perspective typical industry trends pre COVID-19 had been that Q1 and Q2 are similar from a demand perspective.
As our Q3 and Q4 compare to each other with.
With demand slightly stronger in the back half of the year compared to the first half.
Eric: This pattern has changed, however, due to COVID. For this year, we expect the first quarter will be the lowest revenue quarter in dollars for the year, but up approximately 15% year over year.
This pattern has changed however, due to COVID-19 .
For this year, we expect our first quarter will be the lowest revenue quarter in dollars for the year, but up approximately 15% year over year.
Eric: We were not immune to widespread Omicron-related staffing shortages and adverse winter weather that did impact our operating performance in January and February of this year. In addition, the moratorium that recently ended resulted in reduced flying availability for certain members and non-members and impacted our lower-end connect membership sales that do not have the same guaranteed flight rule status core members.
We were not immune to widespread omicron related staffing shortages and adverse winter weather that did impact our operating performance in January and February of this year.
In addition, the moratorium that recently ended.
<unk> and reduced flying availability for certain members and non members and impacted our lower end connect membership sales at <unk>.
Not have the same guaranteed saiful status core members.
Eric: The good news is demand has picked up as the moratorium was eased. As a result, we expect our total revenue to grow each quarter over the course of the year.
The good news is demand has picked up as the moratorium was needs as a result, we expect our total revenue to grow each quarter over the course of the year.
Moving to margins cost of service our customers have increased as we worked through operational process improvements and develop our technology.
Eric: costs of service our customers have increased as we work through operational process improvements and develop our technology.
Eric: While fuel costs for one are sharply higher due to geopolitical events, we will start mitigating this, effective April 9th, as we implement the fuel surcharge I discussed earlier.
Fuel costs for one are sharply higher due to geopolitical event, we will start mitigating this effective April nine as we implement the fuel surcharge I discussed earlier.
Eric: When you consider things all together, we expect our adjusted contribution margin in the first quarter will be down slightly versus the fourth quarter and improve as the year progresses.
When you consider things altogether, we expect our adjusted contribution margin in the first quarter will be down slightly versus the fourth quarter and improve as the year progresses.
Eric: We expect first quarter adjusted EBITDA to be in a range of negative $52 million to negative $57 million.
We expect first quarter adjusted EBITDA to be in a range of negative <unk> 2 million to negative $57 million.
Eric: We also expect to report a gap net loss of between $105 to $115 million for the first quarter.
We also expect to report a GAAP net loss of between $105 million to $115 million for the first quarter.
Eric: Reflected in this gap range are several non-cash estimates.
Collected in this GAAP range are several noncash estimates.
Eric: A $10 million charge related to earn out shares. A $15 million expense related to stock-based compensation. $20 million in depreciation and amortization.
A $10 million charge related to earn out shares of $15 million expense related to stock based compensation.
$20 million, depreciation and amortization expense and $10 million of restructuring costs and other noncash items.
Eric: and $10 million of restructuring costs and other non-cash items.
Eric: The range does not reflect any non-cast gain or loss related to the fair value of all warrants or any other unusual item.
The range does not reflect any noncash gain or loss related to the fair value of our warrants or any other unusual items.
Eric: As our operational and technology initiatives progress, along with better pricing, we still expect to exit the year with higher margins that will set us up well for 2023 and beyond.
As our operational and technology initiatives progress along with better pricing, we still expect to exit the year with higher margins that will set us up well for 2023 and beyond.
Eric: However, with the current geopolitical landscape, coupled with macroeconomic uncertainties, we think it is prudent for now to provide a just-and-even-dying gas-earnings guidance one quarter at a time.
However, with the current geopolitical landscape coupled with macroeconomic uncertainties. We think it is prudent for now provide adjusted EBITDA and GAAP earnings guidance, one quarter at a time.
In closing I want to reiterate our core <unk> business member retention and lifetime value are very important to the long term value of the company.
Eric: In closing, I want to reiterate our core and business member retention and lifetime value are very important to the long-term value of the company.
Eric: That is why we are incurring incremental costs to ensure our customers get the best possible experience in this environment.
That is why we are incurring incremental costs to ensure our customers get the best possible experience and this alignment.
Eric: We are investing in our technology-enabled marketplace platform and still believe we will significantly increase margins in the future.
We are investing in our technology enabled marketplace platform and still believe we will have significantly increased margins in the future.
Speaker Change: With that, thank you all for joining. Let me turn the call back to the operator so we can take your questions.
Thank you all for joining let me turn the call back to the operator, so we can take your questions.
If you would like to ask a question. Please press star followed by one on your telephone keypad now if you change your mind. Please press conference.
Speaker Change: If you would like to ask a question, please press star followed by 1 on your telephone keypad now. If you do change your mind, please press star followed by 2.
Speaker Change: When the painter asks a question, please ensure that your line is unmuted.
Thanks Ross your question. Please ensure that your line is on mute.
Speaker Change: Our first question comes from Michael Bellisario from Baird, your line is now open please go ahead.
Our first question comes from Michael Bellisario from Baird. Your line is now Aitken. Please go ahead.
Thanks, and good morning, everyone.
Just wanted to.
Michael Bellisario: The 1P fleet strategy information you gave was great. Can you maybe take a step back given all the changes that have occurred recently on the revenue and expense side? How do you think about the sweet spot of your business going forward in terms of balancing 1P, 2P, and 3P investments?
The one piece fleet strategy information you gave us was great, but can you maybe take a step back given all the changes that have occurred recently on a revenue and expense side.
Do you think about the sweet spot of your business going forward in terms of balancing <unk> and <unk> investments.
Eric.
Speaker Change: Thanks, Michael. Thanks, Penny. So, in terms of, look, we expect to grow each of our 1P, 2P, and 3P capabilities over time. Clearly, in this market environment where, as I said, 3P costs have increased as demand has increased across the entire market, it's, you know, more advantageous for us to put more activity on our 1P fleet or leverage our 2P fleet, you know, in terms of profitability.
Thanks, Michael Thanks, So in terms of what we expect to grow each of our <unk> capabilities.
Capabilities over time.
Clearly in this market environment, where as I said, reducing costs or have increased as demand has increased across the entire market.
More advantageous for us to put more.
Do you have any on our <unk> fleet warrant and our leverage on <unk> in terms of profitability.
Speaker Change: over time and we talked about this at our analyst day that our 1p fleet has the most profit opportunity for us with 30 plus target margins.
Over time, and we talked about this at our analyst day that our one fleet as the most profit opportunity for us with 30% plus target margin.
Speaker Change: 2P and 3P generally earn that 15% to 25% target margins, and this is more over the long term. I would say today that's shifted a little bit in terms of we're seeing more profitability right now on our 2P fleet.
And prepaid generally on that 15% to 25% target margins and this is <unk>.
Over the long term.
I would say today that shifted a little bit in terms of we're seeing more profitability right now and are too deeply.
Speaker Change: versus 1P and 3P, and we have more opportunity right now on the 1P because our utility has not improved. As we improve utility, that's really where you get the benefit in margin expansion because you've already, you know, once you've covered your fixed cost, you have the opportunity to really...
Versus one in prepaid and we have more opportunity right now on the <unk> because our our utility has not improved as we improved utility that's really where you get the benefit in margin expansion because you've already once you've covered your fixed cost you have the opportunity to really that incremental.
Speaker Change: you know, that incremental flight, those incremental flights really are at a variable cost. And, you know, so we're working through making sure that we have the pilots and the maintenance availability to get our 1P fleet running at the level that we need it to. And then we can turn on the spigots of more demand.
Incremental light those incremental flights really are at a variable cost.
So we're working through making sure that we have the pilots the maintenance availability to get or what needs to be running at the level that we needed to do and then we can turn on the spigot more demand.
Speaker Change: to essentially, you know, drive that utility, you know, in the first, as I said, you know, we really haven't been opening up the marketplace to the aperture.
Essentially drive that utility.
In the first.
As I said, we really haven't been opening up the marketplace to the aperture.
Speaker Change: to non-members so we can add more supply, whether it's 1P, 2P, or 3P, and open it up to more members and non-members.
Non members. So we can add more supply whether it's <unk>, three 2 billion or three games and open it up to more members and nonmembers.
Yes, Mike.
Yes.
Speaker Change: The key utility here for us, consolidating certificates, global scheduling, is going to open that up for us in a meaningful way as well.
Just to give you guidance here for us consolidating certificates global scheduling is going to open that up for us in a meaningful way as well.
Got it and then just one more for me.
Speaker Change: been using your balance sheet a little bit more and it seems like you're more inclined to lean in a little bit as you look out maybe 12 months, 12 plus months, 12 plus months. How much of your current investment capacity do you think you could use or do you want to use to further bolster the one peacefully?
We've been using your balance sheet, a little bit more on it seems like you're more inclined to lean in a little bit as you look out maybe 12 months 12, plus months 12 plus months.
Much of your current investment capacity do you think you could use or do you want to use to to further bolster the one but one deeply.
So I'll take that one so in terms of.
Speaker Change: So, I'll take that one, Kenny. So, in terms of our CAPEX guidance said that supplies that we're going to spend about.
Our capex guidance said that.
Find that we're going to spend about.
Kenny Dick: Well, $60 million of normal capex, which is about a little less than half of that, is going to be related to purchasing aircraft on our ballot.
$60 million of normal Capex was about little less than half of that is going to be related to purchasing aircrafts on our balance sheet.
Kenny Dick: That's the current plan for right now. That does not include those assets held for sale, which are assets, those aircraft that we're essentially buying with the ability to either sell off to an owner that will put them in our managed fleet or, you know, work with somebody to lease that back to us as a, you know, still part of 1P, but through an operating lease, not as a, you know, fixed asset.
That's the current plan right now that does not include those assets held for sale, which are assets those aircraft that we're essentially buying but the ability to either sell off to an owner that will put them in our managed fleet or.
Working with somebody has to be sent back to us.
It's still part of <unk>, but not through an operating lease not as a fixed asset.
Kenny Dick: And at the end of the year, we had $18 million.
And at the end of the year, we had $18 million.
Kenny Dick: of assets held for sale. That will probably increase to about $50 or $60 million pretty quickly here. We've had a lot of success in acquiring aircraft that we can place into management, for example. That's a great deal for us where we have some great examples where we've been able to take an aircraft, find an owner that's looking for that aircraft.
Assets held for sale that will probably increase to about 50 or $60 million pretty quickly here.
We've had a lot of success.
Bayern aircrafts that we can place into management for example, I mean, that's a great deal for us.
Some great examples where we've been able to take an aircraft finance finding an owner that's looking for that aircraft.
Kenny Dick: It's the type of aircraft that we actually utilize and are free today, and they'll pay us a management fee to manage that aircraft, and that will pay them an hourly rate when we utilize that aircraft for high charter availability.
These are aircraft that we actually utilized in our fleet today and they'll pay us a management fee to manage that aircraft and that will pay them an hourly rate.
That aircraft firm for high charter availability.
Thank you.
Right.
Our next question comes from Gary <unk> from Barrington Research. Your line is now open. Please go ahead.
Speaker Change: Our next question comes from Gary Presapino from Barrington Research. Your line is now open, please go ahead.
Gary Presapino: Hey, good morning, everyone. A couple of questions here on your pilot retention, first of all, particularly as it relates to the King Airs. I mean, how has that stabilized or improved from where you were at the end of Q3?
Hey, good morning, everyone.
Couple of questions here on <unk>.
The pilot retention first of all and particularly as it relates to the seniors I mean, how has that stabilized or improved.
From where you were at the end of Q3.
Hey, Gary Thanks for the question.
Speaker Change: Yes, we're doing two things for, you know, for pilot retention, right? We had a new program called Aircrew 360.
Yes.
<unk>.
Pilot retention Rihanna.
A new program.
Through 2016.
Speaker Change: It's involved a kind of a comprehensive look of everything about the career progression benefits compensation. We were the first in the industry to provide stoppage compensation to our pilots.
More or less kind of a comprehensive look of everything above them that career progression benefits compensation.
The first in the industry to provide stock based compensation to our pilots.
Speaker Change: So we are stabilizing the retention on the pilot.
We are stabilizing.
The retention on the pilots.
Speaker Change: We've also doubled down on hiring, like the speed in which we hire, the focus we have to give higher referral bonuses for our pilots if they refer people. Overall, we're very pleased with the progress we've made, both on the retention side as well as acquisition of new pilots for the King Air as well.
We will also double down on hiring like the speed in which we hire the focus we have do higher referral bonuses got our pilots et cetera, where people.
Overall.
We're very pleased with the progress <unk> made both on the retention side as well as acquisition of new pilots can get as well.
Okay. So.
Speaker Change: So these 150 pilots that you've hired, as well as you say you're gonna have 200 hired by the end of Q1, when will they be totally certified to start flying the King Airs?
So these 150 pilots that you acquired as well as you say youre going to have 200 higher by the end of Q1 when will they be.
Totally certified to start flying the King airs.
Speaker Change: So about half of them are already getting certified, you know, you know, unlike other industries, when a pilot gets hired, there are three or four steps that we have to take. One is, you know, there needs to be background investigation that happens on their qualifications and performance. You know, with a previous company have to give that data, and there's like a class one medical examination with an FA, a qualified medical examiner.
So about half of them are already getting certified.
Unlike other industries in our pilot gets higher the three or four steps that we have to pick one isn't there needs to be background investigation that happens on the qualifications and procurements.
With a previous company would like to give the data on that.
The class one medical examination within qualified medical examiner than they.
Speaker Change: Then they get introduced to operations right now with respect to company specific operating procedures. And then they get titrated for the specific type of aircraft. And then they start doing what are called initial operating experience. It takes a couple of months. So half of them are coming out of training as we speak.
Interviews or.
Operations right now with respect to company specific operating pushing jobs.
And then they get pipe record for the specific type of aircraft and then they start doing we're not party initial operating experience. It takes a couple of months so half of them are coming out of training as we speak.
Speaker Change: because we've been hiring since November , right? So, and so this is an ongoing process as they keep on coming more and more onto the platform for us to produce revenue-generating flights.
Because we've been hiring since November right. So and so this is an ongoing process.
Coupon coming more and more onto the platform for us to predict revenue competitive price.
Speaker Change: So I guess I guess in in what you're saying by.
So I guess I guess.
In.
What youre, saying bye.
Speaker Change: Q4 of 2022 going into 2023, the bulk of these pilots will be able to fly these planes.
Q.
Four of <unk> to two going into 2023, the bulk of these pilots will be able to fly these planes.
Speaker Change: on regular schedules. Is that kind of a good bogey there?
On regular schedules is that kind of a good bogey there.
Speaker Change: Well, the 150 to 200 we have hired, they should be able to fly in Q2 of 2022, not even Q4.
Well the 150 to 200 bps higher this would be able to fly in Q2 of 2020 to 91 in Q4.
Speaker Change: So it does not take a few months. So yeah, definitely in Q2.
So it does not take a few months so yes definitely.
Speaker Change: Okay. And then in terms of the King Air, which you said you had a lot of capacity and upside, I mean, what is going on there with the utilization? I believe it was probably
Okay, and then in terms of the King Air, which you said you had a lot of capacity and upside.
What what is going on there with the utilization.
I'll leave it was probably.
Speaker Change: down in Q4. How does that look now in Q1 and where do you think you can take it by the end of the year?
Down in Q4.
How does that look now in Q1, and where do you think you can take it by the end of the year.
Speaker Change: Look, we don't specify actual utilization numbers. There are three things that affect utilization, right? One is, you know, what we call green planes and green pilots.
Look we don't.
Specify actual utilization numbers.
The two things.
Utilization rate one is.
What we call Green Plains and Green pilots.
Speaker Change: We can dramatically improve the maintenance by improving green planes as we get pilots we we have We can improve the dramatically the number of
We can dramatically improve the maintenance by improving Green plains.
Get the pilots we have we can improve dramatically the number of <unk>.
Speaker Change: pilots we have, so there's green planes and green pilots, and then we can optimize the optimization.
Pilots.
Green principally in pilots and then we can optimize.
The optimize them. These utilization numbers that we have are something that we have achieved in Q2 of last year.
Speaker Change: These utilization numbers that we have are something we have achieved in Q2 of last year.
Speaker Change: So we can easily beat that as we improve our pilot ratios and use software to optimize the schedules.
We can easily beat that.
Our pilot ratios and your software to optimize the videos.
Speaker Change: We won't provide specific utilization numbers, but these are things that we have achieved in the past, and as we get pilot ratios to be better, we can get it going. One thing on Q4.
We won't provide specific utilization numbers, but.
These are things that you had in the past and as we get pilot ratio will be better.
Can you get it growing one thing on Singapore.
Speaker Change: We were not immune to Omicron-related shortages, both on the maintenance side, both on first party and third party, and cruise itself, as when they fell sick during Q4. You might have heard through other airlines where last few weeks of December there was pilot-related shortages.
We were not immune to omicron related charters, it's both both on the maintenance side, both on first party and third party and prove itself out.
When they felt during Q4 as you might have heard rather.
Airlines, who have.
Last few weeks of December .
Credit growth have started are we.
Speaker Change: We do believe with higher pilot ratios, that with software to manage the crew and scheduling and optimizing, we can dramatically increase the utilization of the King Air fleet.
We do believe.
With higher pilot ratios that were software.
The SKU and scheduling and optimizing we can dramatically increase the utilization.
Looking at group.
Speaker Change: Okay, thank you. And then, Eric, lastly, you cited a bunch of below-the-line components in Q1 to get to the adjusted EBITDA. Could you just go through those again? I couldn't write them down quick enough.
Okay. Thank you and then Eric Lastly, you cited a bunch of below the line.
Components in Q1.
To get to the adjusted EBITDA could you just go through those again I Couldnt I couldnt write them down quick enough.
Eric: Sure, give me a second to get my notes here, but essentially it was $20 million of depreciation was one of them. There was I think $10 million related to a burnout share. These are all non-cash items.
Sure Yes.
Yes.
I noticed here.
Essentially it was $20 million of depreciation was one of them.
Related to earn out shares these are all non cash item.
Right.
Yeah.
Eric: So $15 million related to stock being the top.
Sure.
$8 million related to stock based comp.
Eric: and $10 million related to restructuring costs and other non-cash items.
And $10 million related to restructuring costs and other non cash items.
Eric: So the total amount of add-backs are about $55 million.
The amount of add backs are about.
$55 million.
Thank you.
Right.
Yes.
Speaker Change: As another reminder, if you would like to ask a question, please press star followed by one on your telephone keypad. Now our next question comes from Marvin Song from BTIG. Your line is now open. Please proceed with your question.
As a reminder, if you would like to ask a question. Please press star followed by one on your kind of turnkey partner.
Our next question comes from Marvin Fong from <unk>. Your line is now open. Please proceed.
Your question.
Marvin Song: Craig, good morning. Thanks for taking my questions. Um, this first question on fuel, um, sounds like, uh
Great. Good morning, Thanks for taking my questions.
The first question on fuel.
It sounds like.
Marvin Song: your fuel surcharge won't be hitting in the first quarter so just uh do you have a sense of if if the if the surcharges were in place for the first quarter like what would your EBITDA adjusted EBITDA number come in at um and then i have a follow-up question
Your fuel surcharges won't be hitting in the first quarter. So just.
Do you have a sense of that.
But the surcharges were in place for the first quarter like what would your EBITDA adjusted EBITDA number come in at.
And then I have a follow up question.
Speaker Change: So, Martin, Sarah, I'll take a broader...
So Marty it's Eric I'll take that broader.
Purchased ethanol zero down a little bit more on your question. So look as I mentioned in my prepared remarks, we implemented fuel surcharge for our members, including those with prepay blocks.
Speaker Change: approach to this, and I'll zero down a little bit more on your question. So, look, as I mentioned in my prepared remarks, we implemented a fuel surcharge for our members, including those with prepaid blocks.
Speaker Change: And it's the first time in our history that we've taken such an action, even though our contract's permitted. And as you mentioned, the surcharge takes effect April 9th.
First time in our history that we've taken some action, even though our contracts permit and as you mentioned is a surcharge takes effect April nine.
Speaker Change: You know 30 days notice so therefore we'll all set our cost increases our cost in the second quarter and that surcharge ranges from 280 sorry two hundred ninety five dollars to eight hundred ninety five dollars per hour. That's based on cabin class
30 days notice. So therefore, it will offset our cost increases.
Cost in the second quarter and that surcharge ranges from 280, so im sorry, $295 to $895 per hour. That's based on cabinet glass. So some history on our fuel cost. So fuel was about 15% of our GAAP cost of revenue for 2021, and that's about 165.
Speaker Change: So some history on our fuel costs. So fuel was about 15% of our gas cost of revenue for 2021. That's about $165 million. And so a 10% change or increase in fuel expense would increase our costs by about $16 million a year on a similar amount of flight volume.
And so a 10% change or increase in fuel expense will increase our cost by about $16 million a year on a similar amount of volumes.
Speaker Change: The commodity price of fuel comprises about 50% of our total fuel costs. If you look at distribution taxes, those are more fixed, and that's sort of the remaining other half.
The commodity price of fuel comprises about 50% of our total fuel costs.
You look at distribution taxes.
Those are more fixed and thats sort of the remaining other half.
Speaker Change: The Jet Fuel Commodity Index price was about $2.16 per gallon, a year end, and that's up from $1.34 at the end of 2020. As of the other day, the index crossed the $4 mark, which would increase our costs by about double, which is about double the increase in the last two months.
But jet fuel commodity index price was about to $2 60 per gallon at year end and Thats up from $1 34 at the end of 2020.
The other day the index across the $4 Mark.
Which would increase our cost by double I wondered about double the increase in the last two months.
Speaker Change: At the current index cost, our fuel cost would increase by about 50 percent, but that would be substantially offset by that originally announced surcharge.
And the current index costs or fuel costs would increase by about 50%.
Let's be substantially offset by that our recently announced surcharge.
Speaker Change: If the fuel costs continue to rise, we do have the ability to take further action by amending our Terms of Service.
Fuel costs continue to rise we do have the ability to take further action by amending our terms of service and to.
Speaker Change: In terms of what the impact was, I can give you sort of what the rough impact is on March, and that would be about $3 to $4 million, based on sort of that increase. It's hard to kind of go back and say, you know, depending on what rate to use for the beginning of the year and such, but to give you a sense of the incremental impact for us for March is about $3 to $4 million.
What the impact was.
I can give you sort of what the rough impact on March and that would be about $3 million to $4 million was based on sort of that increase it's hard to kind of go back and say you know depending on what rates you use at the beginning of the year and such.
Give me a sense of the incremental impact for us.
March is about $3 million to $4 million.
Speaker Change: Okay, all right, that's super, super helpful. Thanks for that. And then my other question, just the Air Partner Acquisition gets you into Europe . Could you discuss any businesses they were doing with the Russia, Ukraine area and also
Okay, Alright, that's super Super helpful. Thanks for that and then.
Other questions.
The air partner acquisition gets you into Europe .
Could you discuss.
Any business that they were doing.
With that.
Russia, Ukraine area and also.
Speaker Change: you know, just just as you're thinking about expansion into Europe .
Just just thinking about the expense and in the Europe .
Speaker Change: change at all? Are you seeing potentially more M&A opportunity there or any additional thoughts on geographic expansion would be great. Thanks.
Changed at all are you seeing potentially more M&A opportunity there or any additional thoughts on geographic expansion would be great. Thanks.
Speaker Change: Yeah. Marvin it's Kenny. Thanks for the question. And as we've talked about since our public offering we we see our brand as a global brand.
Yeah, Marvin it's Kevin Thanks for the question.
We've talked about since our public offering we see our brand as a global brand are partner, a 60 year history.
Kenny Dick: air partner, a 60-year history, incredible talented people at that light. Their exposure in Russia is minimal, non-material, which is great. They service Europe . If you think about being a Wheels Up member and the value of being a Wheels Up member, there's plenty of folks that are going to fly over on a Delta airline airplane or an affiliate, and they're going to pick up the air partner network and vice versa.
Incredible talented people asset light.
Their exposure in Russia is minimal.
Non material, which is great.
They service Europe , if you think about being a wheel September and the value of being a wheels up remember there's plenty of folks that are going to fly over on a delta airline airplane or an affiliate and theyre going to pick up the air partner network and by diverse.
Kenny Dick: Mark Griffith, their CEO , is excited to be our person in Europe working directly with Vinayak on the business forward. But we always talked about planting a flag there. I think there's some great opportunistic opportunities. We talked about our cash position leaving this year with over $750 million. And that doesn't account for our ability to back-lever our assets that we pay down. So you have another couple hundred million-plus to utilize should we need it.
Mark <unk> CEO is excited to be our person in Europe working directly with Vinayak.
On.
The business forward, but we always talked about planting a flag there I think there are some great opportunistic opportunities.
We talked about our cash position.
Leaving this year with over $750 million and that doesn't account for our ability to back lever our assets that we paid down. So you have another couple of hundred billion plus.
To utilize should we want to want to do that but really really exciting super talented team and again like I said, we see a global opportunity here.
Kenny Dick: want to do that. But really, really exciting, super talented team. And again, like I said, we see a global opportunity here. So, so excited about Air Park.
So excited about air partner.
Terrific, Thanks, Kenny and I appreciate it.
Speaker Change: That was our final question, so I'll hand it back to Kenny Dictor for closing remarks.
That was our final question, so I'll hand, it back to Kevin Kessel for closing remarks.
Kenny Dictor: Hey, Maxine, thank you so much for hosting and thanks to everybody for joining us today. I'm going to leave everybody with one final thought. We're making substantial progress in building an innovative technology-enabled marketplace to optimize fragmented supply. We will connect that supply with a large growing and dynamic addressable market, all supported by our trusted and iconic Wheels Up brand. Want everybody to have a good day, and thanks again. Wheels are up.
Maxine. Thank you so much for hosting and thanks to everybody for joining us today.
I'm going to leave everybody with one final thought.
Making substantial progress in building, an innovative technology enabled marketplace optimized fragmented supply.
We will connect that supply with a large growing and dynamic addressable market all supported by our trusted and iconic wheels up brand when everybody to have a good day and thanks again wheels around.
Okay.
Speaker Change: Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your line.
Ladies and gentlemen. This concludes today's call. Thank you for joining you may now disconnect your lines.
Speaker Change: © transcript Emily Beynon
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