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Wheels Up Experience (UP)
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Risk Overview Q3, 2024
Risk Distribution
40% Finance & Corporate
26% Production
10% Legal & Regulatory
10% Ability to Sell
9% Macro & Political
5% Tech & Innovation
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
This chart displays the stock's most recent risk distribution according to category. TipRanks has identified 6 major categories: Finance & corporate, legal & regulatory, macro & political, production, tech & innovation, and ability to sell.
Risk Change Over Time
S&P500 Average
Sector Average
Risks removed
Risks added
Risks changed
Wheels Up Experience Risk Factors
New Risk (0)
Risk Changed (0)
Risk Removed (0)
No changes from previous report
The chart shows the number of risks a company has disclosed. You can compare this to the sector average or S&P 500 average.
The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.
The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.
Risk Highlights Q3, 2024
Main Risk Category
Finance & Corporate
With 23 Risks
Finance & Corporate
With 23 Risks
Number of Disclosed Risks
58
No changes from last report
S&P 500 Average: 31
58
No changes from last report
S&P 500 Average: 31
Recent Changes
0Risks added
0Risks removed
0Risks changed
Since Sep 2024
0Risks added
0Risks removed
0Risks changed
Since Sep 2024
Number of Risk Changed
0
No changes from last report
S&P 500 Average: 3
0
No changes from last report
S&P 500 Average: 3
See the risk highlights of Wheels Up Experience in the last period.
Risk Word Cloud
The most common phrases about risk factors from the most recent report. Larger texts indicate more widely used phrases.
Risk Factors Full Breakdown - Total Risks 58
Finance & Corporate
Total Risks: 23/58 (40%)Above Sector Average
Share Price & Shareholder Rights10 | 17.2%
Share Price & Shareholder Rights - Risk 1
Our Organizational Documents and the Investor Rights Agreement include provisions limiting voting and control by non-U.S. Citizens.Share Price & Shareholder Rights - Risk 2
The provisions of our Certificate of Incorporation requiring exclusive forum for certain types of lawsuits may have the effect of discouraging certain lawsuits, including derivative lawsuits and lawsuits against our directors and officers, by limiting plaintiffs' ability to bring a claim in a judicial forum that they find favorable.Our Certificate of Incorporation provides that, to the fullest extent permitted by law, and unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if that such court does not have jurisdiction, the federal district court for the District of Delaware or other state courts of the State of Delaware) will be the sole and exclusive forum for any claims made by any stockholder (including a beneficial owner) for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee to us or our stockholders, (iii) any action asserting a claim against us, our directors, officers or employees arising pursuant to any provision of the DGCL or Organizational Documents, (iv) any action asserting a claim against us, our directors, officers or employees governed by the internal affairs doctrine or (v) any action asserting an "internal corporate claim" as that term is defined in Section 115 of the DGCL. Notwithstanding the foregoing, our Certificate of Incorporation provides that federal district courts will be the sole and exclusive forum for claims under the Securities Act and Exchange Act.
These provisions may have the effect of discouraging certain lawsuits, including derivative lawsuits and lawsuits against our directors and officers, by limiting plaintiffs' ability to bring a claim in a judicial forum that they find favorable. The enforceability of similar choice of forum provisions in other companies' certificates of incorporation has been challenged in legal proceedings, and as a result, a court could find the choice of forum provisions contained in our Certificate of Incorporation to be inapplicable or unenforceable in such action.
Share Price & Shareholder Rights - Risk 3
Delaware law and our Organizational Documents contain certain provisions, including anti-takeover provisions that limit the ability of stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable.Our Organizational Documents and the General Corporation Law of the State of Delaware (the "DGCL") contain provisions that could have the effect of rendering more difficult, delaying or preventing an acquisition that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares. These provisions could also limit the price that investors might be willing to pay for shares of our Common Stock, and therefore depress the trading price of our Common Stock. These provisions could also make it difficult for stockholders to take certain actions, including electing directors who are not nominated by the current members of our Board or taking other corporate actions, including effecting changes in our management. Among other things, our Organizational Documents include provisions regarding:
- providing for a classified board of directors with staggered, three-year terms;- the ability of our Board to issue shares of preferred stock, including "blank check" preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;- the ability of stockholders to act by written consent without a meeting of our stockholders if consent is received by the holders of outstanding shares of the relevant class or series having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting;- our Certificate of Incorporation prohibits cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;- the limitation of the liability of, and the indemnification of, our directors and officers;- the ability of our Board to amend our Bylaws, which may allow our Board to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend our Bylaws to facilitate an unsolicited takeover attempt; and - advance notice procedures with which stockholders must comply to nominate candidates to our Board or to propose matters to be acted upon at a stockholders' meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in our Board and also may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer's own slate of directors or otherwise attempting to obtain control of us.
These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our Board or management.
Share Price & Shareholder Rights - Risk 4
We may redeem your unexpired Warrants prior to their exercise at a time that is disadvantageous to you, thereby making your Warrants worthless.We have the ability to redeem the outstanding Warrants at any time after they become exercisable and prior to their expiration, at a price of? $0.01 per Warrant if, among other things, the last reported sale price of a share of Common Stock for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which we send the notice of redemption to the Warrant holders (the "Reference Value") equals or exceeds $180.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a Warrant). If and when the Warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. As a result, we may redeem the Warrants as set forth above even if the holders are otherwise unable to exercise the Warrants. Redemption of the outstanding Warrants as described above could force holders to: (i) exercise Warrants and pay the exercise price therefor at a time when it may be disadvantageous for the holders to do so; (ii) sell Warrants at the then-current market price when the holders might otherwise wish to hold Warrants; or (iii) accept the nominal redemption price which, at the time the outstanding Warrants are called for redemption, we expect would be substantially less than the market value of the Warrants. Except in limited circumstances, none of the Private Warrants will be redeemable by us (so long as they are held by Aspirational Consumer Lifestyle Corp. ("Aspirational") or its permitted transferees).
In addition, we have the ability to redeem the outstanding Warrants at any time after they become exercisable and prior to their expiration, at a price of $0.10 per Warrant if, among other things, the Reference Value equals or exceeds $100.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a Warrant). In such a case, the holders will be able to exercise their Warrants prior to redemption for a number of shares of Common Stock determined based on the redemption date and the fair market value of our Common Stock. The value received upon exercise of the Warrants (i) may be less than the value the holders would have received if they had exercised their Warrants at a later time where the underlying share price is higher and (ii) may not compensate the holders for the value of the Warrants, including because the number of ordinary shares received is capped at 0.0361 Common Stock per Warrant, subject to adjustment, irrespective of the remaining life of the Warrants.
Share Price & Shareholder Rights - Risk 5
We may amend the terms of the Warrants in a manner that may be adverse to holders of the Warrants with the approval by the holders of at least 65% of the then outstanding Public Warrants.The warrant agreement governing the Warrants (the "Warrant Agreement") provides that the terms of the Warrants may be modified or amended upon the vote or written consent of at least 65% of the then outstanding Public Warrants and, solely with respect to any amendment to the terms of the Private Warrants or any provision of the Warrant Agreement with respect to the Private Warrants, at least 65% of the then outstanding Private Warrants. Accordingly, we may amend the terms of the Public Warrants in a manner adverse to a holder if holders of at least 65% of the then outstanding Public Warrants approve of such amendment. Although our ability to amend the terms of the Public Warrants, subject to consent by the Public Warrant holders, is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the Warrants, shorten the exercise period or decrease the number of shares of Common Stock purchasable upon exercise of a Warrant, including pursuant to a stock split or reverse stock split.
Share Price & Shareholder Rights - Risk 6
The NYSE may delist our Common Stock from trading on its exchange, which could limit investors' ability to make transactions in our securities and subject us to additional trading restrictions.The NYSE has established certain standards for the continued listing of a security on the NYSE. There can be no assurance that we will meet these standards in the future to maintain the listing of our Common Stock on the
NYSE, which could be impacted by, among others, the trading price of our Common Stock, our reported results of operations in future periods, and general economic, market and industry conditions. We may take action to avoid such delisting, which may not be successful and could have a material adverse effect on our business, results of operations and financial condition. If our Common Stock is delisted from the NYSE, we may seek to list on another stock exchange or quotation service, which may result in, among other things, an increase in the volatility of, and a limited ability to transact in, our Common Stock, as well as an overall decrease in the trading prices of our Common Stock. If we are not able to obtain a substitute listing for our Common Stock, stockholders may encounter difficulty or be unable to sell their Common Stock. A delisting of our Common Stock from the NYSE could also adversely affect our ability to obtain new or replacement financing and/or result in a loss of confidence by our members, customers, business partners, stockholders, the holders of Warrants (as defined below) or employees.
Share Price & Shareholder Rights - Risk 7
Future resales of our Common Stock may cause the market price of our securities to drop significantly, even if our business is doing well.Sales of a substantial number of shares of our Common Stock in the public market or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our Common Stock. Our Lenders and certain of our former directors, officer and employees own a substantial number of shares of Common Stock relative to recent historical daily trading volumes. The sale or possibility of sale of these shares could have the effect of increasing the volatility in our Common Stock price or could cause the market price of our Common Stock to increase or decrease rapidly if the holders of such shares sell them or are perceived by the market as intending to sell them.
Share Price & Shareholder Rights - Risk 8
Certain stockholders which also serve as lenders have significant influence over the Company.Certain of the Company's stockholders, including Delta, CK Wheels and CIH, collectively own a substantial majority of the outstanding shares of our Common Stock. As a result of their beneficial ownership of our Common Shares, they have sufficient voting power to significantly influence all matters requiring stockholder approval, including the election of directors, approval of strategic corporate transactions, such as changes in control, or changes in our Board or management. Under our Certificate of Incorporation, our stockholders may act by written consent without a meeting or soliciting the vote of stockholders if such consent is received by the holders of outstanding shares of the relevant class or series having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting of the stockholders. In addition, such stockholders have the contractual right to designate a total of nine of the twelve directors on our Board of Directors.
Additionally, such stockholders are also lenders under our Term Loan and Revolving Credit Facility. In their capacity as lenders, such stockholders must consent to certain transactions and have the ability to waive defaults or direct the agent under the Credit Agreement to exercise remedies in an event of default. As a result, such stockholders in their capacity as beneficial owners and lenders, may exhibit significant influence over the Company, and the interests or objectives of these stockholders may differ from the interests or objectives of other stockholders.
Finally, if these stockholders were to sell a substantial number of shares of our Common Stock in the public market, the market price of our Common Stock could be adversely impacted and volatility could increase. The perception or expectation among the public regarding any such sales or the ability of such stockholders to maintain certain rights tied to the level of ownership of Common Stock could also contribute to a decline in the market price of our Common Stock. Similarly, if these stockholders were to assign or transfer their rights and obligations under the Term Loan and Credit Facility to third parties, the third parties could exercise, among other things, certain consent and voting rights pursuant to the terms of the Credit Agreement, which could have a material adverse effect on our business, liquidity, financial condition and results of operations.
Share Price & Shareholder Rights - Risk 9
The price of our Common Stock and Warrants may be volatile.The price of our Common Stock as well as our Warrants may fluctuate due to a variety of factors, including: (i) changes in the private aviation industry and general demand for travel services; (ii) changes in general market conditions and macro-economic conditions, including the price of fuel; (iii) developments involving our competitors, such as material announcements; (iv) changes in laws and regulations affecting our business; (v) variations in our operating performance and the performance of our competitors in general; (vi) changes in our level of indebtedness and other obligations or credit ratings, and the terms or covenants associated with our contractual obligations or indebtedness; (vii) actual or anticipated fluctuations in our quarterly or annual operating results and the public's reaction to our press releases, our other public announcements and our filings with the SEC; (viii) publication of research reports by securities analysts about us or our competitors or our industry; (ix) actions by stockholders, including the sale by stockholders of any of their shares of our Common Stock; (x) increases or decreases in reported holdings by insiders or significant stockholders, including shares of Common Stock held by our Lenders; (xi) fluctuations in trading volume and the volume of shares of our Common Stock available for public sale; (xii) additions and departures of key personnel; (xiii) commencement of, or involvement in, litigation involving us; (xiv) changes in our capital structure, such as future issuances of equity securities or the incurrence of debt, and grants of equity awards under our equity incentive plans; and (xv) general economic and political conditions, such as the effects of recessions, increases in interest rates, local and national elections, fuel prices, international currency fluctuations, corruption, political instability and acts of war or terrorism.
Share Price & Shareholder Rights - Risk 10
We have consummated dilutive issuances of Common Stock in the past and we may undertake additional dilutive issuances of equity securities in the future, including pursuant to outstanding equity awards under our equity incentive plans, any cash exercise of WUP and Wheels Up stock options, any exchange of WUP profits interests, the vesting and issuance of the Earnout Shares and the exercise of any Warrants.We have consummated dilutive issuances of Common Stock in the past and may undertake additional dilutive issuances of equity securities in the future. For example, during the year ended December 31, 2023, we issued 671,239,941 shares of Common Stock in the aggregate to the Lenders in connection with the transactions contemplated by the Credit Agreement and Investor Rights Agreement. As of December 31, 2023 and 2022, there were 697,131,838 and 25,198,298 shares of Common Stock outstanding (taking into account the impact of the reverse stock split completed in June 2023), respectively, which excludes the possible future issuance of any Common Stock pursuant to outstanding equity awards under our equity incentive plans, upon any cash exercise of WUP and Wheels Up stock options, upon any exchange of WUP profits interests, due to the vesting and issuance of Earnout Shares and in connection with the exercise of any Warrants. Any of the foregoing that increase the number of shares outstanding will result in a change in the percentage ownership held by existing stockholders in Wheels Up, which may cause relative voting power related to such shares of Common Stock to decrease.
In addition, our past dilutive issuances, including the Common Stock issuances to the Lenders during the year ended December 31, 2023, which were entered into and consummated without the approval of the Company's stockholders based on the Financial Distress Exception provided for in the Shareholder Approval Policy of the NYSE, and any future dilutive issuances, could be the subject of stockholder litigation or disputes, which could adversely impact our business, liquidity, financial condition and results of operations. In addition, our employees, certain directors and consultants hold, and are expected to be granted, equity awards under current and future equity incentive plans. Certain of these equity incentive plans may be approved by the Lenders due to their ability to collectively cast votes for at least a majority of the outstanding shares of Common Stock at a meeting or act by written consent. Existing stockholders will experience additional dilution when those equity awards and purchase rights become vested and settled or exercisable, as applicable, for shares of our Common Stock or other voting securities.
The issuance of additional Common Stock, whether pursuant to equity incentive plans, existing instruments or otherwise, may adversely affect prevailing market prices for our shares of Common Stock and Warrants.
Accounting & Financial Operations6 | 10.3%
Accounting & Financial Operations - Risk 1
In past periods, we identified material weaknesses in internal control over financial reporting, and as of December 31, 2023, we determined that our disclosure controls and procedures were not effective. We may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, which may result in material misstatements of our financial statements or cause us to fail to meet our reporting obligations.Accounting & Financial Operations - Risk 2
We do not intend to pay cash dividends for the foreseeable future.We historically have not, and currently do not intend in the foreseeable future to, pay cash dividends. Any future determination to pay dividends will be at the discretion of our Board and will depend on our financial condition, results of operations, capital requirements, restrictions contained in current or future agreements and financing instruments, business prospects and such other factors as our Board deems relevant.
Accounting & Financial Operations - Risk 3
The residual value of our owned aircraft may be less than estimated in our depreciation policies.As of December 31, 2023, we had $337.7 million of property and equipment and related assets, net of accumulated depreciation, of which $279.9 million relates to our owned aircraft. In accounting for these long-lived assets, we make estimates about the expected useful lives of the assets, the expected residual values of certain of these assets, and the potential for impairment based on the fair value of the assets and the cash flows they generate. Factors indicating potential impairment include, but are not limited to, significant decreases in the market value of the long-lived assets, a significant change in the condition of the long-lived assets and operating cash flow losses associated with the use of the long-lived assets. If the estimated residual value of any of our aircraft types is determined to be lower than the residual value assumptions used in our depreciation policies, the applicable aircraft type in our fleet may be impaired and may result in a material reduction in the book value of applicable aircraft types we operate or we may need to prospectively modify our depreciation policies. An impairment on any of the aircraft types we operate or an increased level of depreciation expense resulting from a change to our depreciation policies could result in a material adverse impact to our financial results. Similarly, any factor that may cause an impairment on any of the aircraft types we operate may result in lower appraised values for such aircraft, which could cause adverse impacts to us under the agreements governing our indebtedness obligations.
Accounting & Financial Operations - Risk 4
We may never realize the full value of our tangible and intangible assets, including goodwill or our long-lived assets, which has caused us to, and may cause us in the future to, record impairments that may materially adversely affect our financial conditions and results of operations.In accordance with applicable accounting standards, we are required to test our indefinite-lived intangible assets, including goodwill, for impairment on an annual basis, or more frequently where there is an indication of impairment. We are also required to test certain of our other assets for impairment where there is any indication that an asset may be impaired, such as our market capitalization being less than the book value of our equity. In recent years, we have realized non-cash goodwill impairment charges, including during each of the three months ended September 30, 2022, December 31, 2022, June 30, 2023, and September 30, 2023, for our WUP Legacy reporting unit (excluding Air Partner), as a result of, among other things, changes in our business plan and forecasts and fluctuations in the trading price per share of our Common Stock.
Quantitative impairment assessments are sensitive to key assumptions, such as expected future cash flows, the degree of volatility in equity and debt markets, and our stock price. If the assumptions used in our assessments are not realized, or such assumptions change due to a change in business or market conditions impacting our forecasts, rises in interest rates that impact our estimate of weighted average cost of capital, or if the trading price of our Common Stock declines significantly from historical levels, it is possible that an additional impairment charge for tangible or intangible assets, including goodwill, may need to be recorded in the future, including as result of the effects of factors outside our control on our business and operations.
The value of our aircraft could also be impacted in future periods by changes in supply and demand for these aircraft, including as a result of the grounding of aircraft, which could adversely impact our business, operating results, cash flows, financial condition and liquidity, and cause adverse impacts to us under the agreements governing our indebtedness obligations. See also "? The residual value of our owned aircraft may be less than estimated in our depreciation policies."
An impairment loss related to our tangible or intangible assets, including goodwill, could have a material adverse effect on our financial condition and results of operations. In addition, an impairment loss that is based on, among others, changes in business or market conditions impacting our forecasts, the weighted average cost of capital or the market price of our Common Stock, may adversely impact the perception of the Company held by stockholders, investors, members and customers, which may adversely impact our business, liquidity, financial condition and results of operations, and the volatility and trading prices for our Common Stock and Warrants. See Note 2, Summary of Significant Accounting Policies and Note 7, Goodwill and Intangible Assets in the of the Notes to Consolidated Financial Statements included herein for additional information about impairment and non-cash goodwill impairment charges realized during the years ended December 31, 2022 and 2023.
Accounting & Financial Operations - Risk 5
Our operating results are expected to be difficult to predict based on a number of factors that also will affect our long-term performance.As we pursue our strategic business initiatives and previously announced financial goals, we expect our operating results to fluctuate in the future based on a variety of factors, including factors outside of our control or that are difficult to predict. In addition, we experience a significant degree of seasonality in our business. We caution you that period-to-period comparisons of our operating results may not be a good indicator of our future growth potential or long-term performance, which may be significantly impacted by the following:
- our ability to successfully execute our business, marketing and other strategies;- we may be unable to attract new customers and/or retain existing members and customers;- we may be impacted by changes in consumer preferences, perceptions, spending patterns and demographic trends, as well as changes in customer creditworthiness that could result in increases in allowance for credit losses or write-offs of receivables that may be uncollectible;- our Adjusted Contribution Margin may be adversely impacted by increased flight costs due to aircraft supply constraints or inflation, as well as guaranteed rate pricing arrangements and fixed purchases of Prepaid Blocks associated with current or former member programs;- our ability to grow complementary products and service offerings may be limited or we may be unable to realize the potential benefits from our technological developments, which could adversely impact our growth rate and financial performance;- our business and operating results may be significantly impacted by actual or potential changes to the international, national, regional and local economic, business and financial conditions, including due to inflation, higher interest rates and geopolitical conditions, the health of the U.S. aviation industry and risks associated with our aviation assets;- we may require additional capital to finance strategic investments and operations, pursue business objectives and respond to business opportunities, challenges or unforeseen circumstances, and we cannot be sure that additional financing will be available on attractive terms or at all;- litigation or investigations involving us could result in material settlements, fines or penalties and may adversely affect our business, financial condition and results of operations;- existing or new regulations or interpretations thereof applicable to our industry may restrict our ability to expand or to operate our business as we wish and may expose us to fines and other penalties;- the occurrence of geopolitical events, such as war, terrorism, civil unrest, political instability, environmental or climatic factors, natural disaster, pandemic or epidemic outbreak, public health crisis and general economic conditions, or natural disasters may have an adverse effect on our business;- some of our potential losses may not be covered by insurance, and we may be unable to obtain or maintain adequate insurance coverage; and - we are potentially subject to taxation-related risks in multiple jurisdictions, and changes in tax laws could have a material adverse effect on our business, cash flow, results of operations or financial condition.
Accounting & Financial Operations - Risk 6
We have a history of net losses and have not consistently generated positive cash flow from operations.We have a history of net losses and have not consistently generated positive cash flow from operations, including during years ended December 31, 2023 and 2022. Given the significant operating and capital expenditures associated with our strategic business initiatives and previously announced financial goals, we anticipate continued variability in our net losses during the period of transition. If we do achieve profitability, we cannot be certain that we will be able to sustain or increase such profitability, which will require, among other things, broadening and stabilizing our sources of revenue, improving our Adjusted Contribution Margin and strategically controlling non-operating expenses. Accomplishing these objectives may require actions to optimize our asset base, make significant capital investments, enter into new markets, exit existing lines of business or implement additional member program changes. We cannot be assured that we will be able to achieve these objectives. If we cannot achieve and sustain profitability or raise additional capital, our business could be materially and adversely affected, as we may not have sufficient liquidity or be able to meet our contractual obligations, including our contractual obligations under operating leases, debt obligations and obligations to customers for which we have already received deferred revenue.
Debt & Financing4 | 6.9%
Debt & Financing - Risk 1
Our Warrants are accounted for as liabilities and the changes in value of our Warrants could have a material effect on our financial results.Debt & Financing - Risk 2
There is no guarantee that our Warrants will be in the money, and they may expire worthless and the terms of our Warrants may be amended.The exercise price for our Warrants is $115.00 per share of Common Stock. There is no guarantee that the Warrants will be in the money at any given time prior to their expiration. If the trading price of our Common Stock declines, the Warrants may expire worthless.
Debt & Financing - Risk 3
Agreements governing our debt obligations include financial and other covenants that provide limitations on our business and operations under certain circumstances. Any failure to comply with any of the covenants in such agreements could adversely impact us.Our financing agreements, including those in connection with the Equipment Notes, the Term Loan and Revolving Credit Facility, and other financing agreements that we may enter into from time to time, contain certain affirmative, negative and financial covenants, and other customary events of default. For example, the governing documents for the Equipment Notes contain certain covenants and events of default, such as a liquidity covenant that requires the Company and its subsidiaries to maintain minimum aggregate available cash and Cash Equivalents (as defined in the Note Purchase Agreement), including certain amounts held in deposit for the benefit of the lenders, of $75.0 million on any date, and a covenant that limits the maximum loan to appraised value ratio of all aircraft financed, subject to certain cure rights of the Company. The governing documents for the Equipment Note also contain restrictive covenants that provide limitations under certain circumstances on, among other things, consummating certain acquisitions, mergers or disposals of assets, making certain investments or entering into certain transactions with affiliates, prepaying, redeeming or repurchasing the Equipment Notes, subject to certain exceptions, and paying dividends and making certain other specified restricted payments. In addition, the Credit Agreement contains separate events of default and covenants, such as limitations on: (i) prepaying, redeeming, repurchasing, or issuing and selling new equity interests of the Company and its subsidiaries; (ii) paying dividends and making certain distributions; (iii) making certain investments and consummating certain acquisitions, mergers or disposals of assets; and (iv) replacing existing indebtedness and incurring new indebtedness and encumbrances. In addition, under the Investor Rights Agreement, we must obtain the approval of certain Lenders to, among other things, incur capital expenditures, consummate certain acquisitions of equity interests or assets in excess of certain amounts, make material changes to the scope of our business, or enter into certain commercial arrangements with a Lender.
Certain of the covenants in our financing agreements are subject to important exceptions, qualifications and cure rights, including, under limited circumstances, the requirement to provide additional collateral or prepay or redeem certain obligations and the ability to delay payments of interest and principal for limited periods of time. In addition, certain of our debt obligations are cross-collateralized, such that an event of default or acceleration of indebtedness under one agreement could result in an event of default under other financing agreements. If we fail to comply with such covenants, if any other events of default occur for which no amendment, consent or waiver is timely obtained, or if we are unable to timely refinance the debt obligations subject to such covenants or take other mitigating actions, the holders of our indebtedness could, among other things, declare all outstanding amounts and any premiums or penalties immediately due and payable and, subject to the terms of relevant financing agreements, repossess or foreclose on collateral, including certain of our aircraft, the equity interests of the Company's subsidiaries or other assets used in our business. The acceleration of significant indebtedness or actions to repossess or foreclose on collateral may cause us to renegotiate, repay or refinance the affected obligations, and there is no assurance that such efforts would be on terms we deem attractive, available in amounts sufficient to satisfy such affected obligations, or at all, or that certain holders of our indebtedness may withhold their consent to such refinancing. We may also experience a downgrade in any credit ratings then applicable to us in such circumstances. Any default, event of default, acceleration of significant indebtedness, actions to repossess or foreclose on collateral, credit downgrade or failure to obtain additional financing on terms we deem attractive, or at all, could have a material adverse effect on our business, results of operations and financial condition.
Debt & Financing - Risk 4
Our ability to obtain additional financing on terms we deem attractive or access the capital markets may be limited.Our operations are capital intensive, and we require sufficient liquidity levels for our operations and strategic growth plans. We have significant debt obligations and may seek to incur additional indebtedness in the future to fund working capital requirements, debt service obligations, capital expenditures and strategic initiatives. Numerous factors may affect our ability to obtain financing or access the capital markets in the future on terms attractive to us, including our liquidity, operating cash flows and the timing of capital requirements, credit status and any credit ratings assigned to us, market conditions in the private aviation industry, U.S. and global economic conditions and conditions in the capital markets generally, and the availability of our assets as collateral for future financings. Our ability to incur additional indebtedness and issue any equity or equity-linked securities without obtaining the consent of third parties is limited under the documents governing the Equipment Notes, Credit Agreement and Investor Rights Agreement. We can provide no assurance that external financing will be available to us in the future on terms that we deem attractive, or at all, to fund the capital needs for our business. Our ability to consummate certain transactions that require the registration of equity, debt or convertible securities under the Securities Act may also be limited if we are unable to meet the requirements or are otherwise eligible to use certain registration statements. If we are unable to source additional financing on terms we deem attractive, or at all, our business, results of operations and financial condition could be materially adversely affected, and we may be unable to execute our strategic goals.
Corporate Activity and Growth3 | 5.2%
Corporate Activity and Growth - Risk 1
We may not be able to successfully implement our growth strategies or realize the expected benefits of our member program changes, and operational efficiency and cost reduction initiatives.Corporate Activity and Growth - Risk 2
We periodically evaluate strategic transactions involving our business, including acquisitions, divestitures, joint ventures, mergers and similar transactions, which involve risk and may adversely affect our ability to execute our strategic business initiatives or achieve our previously announced financial goals.We frequently consider opportunities to acquire or merge with other entities, assets, products or technologies that may enhance our products and service offerings or technology, expand the breadth of our markets or customer base, or advance our business strategies. We also evaluate divestitures, joint ventures and other strategic transactions that we believe will help us execute our strategic business initiatives, achieve our previously announced financial goals or otherwise improve the long-term performance or value of the Company. Any such transaction could be material to our business, involve substantial execution risk, and result in the payment or receipt of different types of consideration, such as cash, the issuance of additional dilutive equity securities, or the assumption or issuance of indebtedness. If we elect to pursue a strategic transaction, our ability to successfully implement and realize benefits from such transaction would depend on a variety of factors, including the requirement to obtain third-party consents, including from the lenders under our debt obligations, or the imposition of additional restrictive agreements or covenants that limit our operating flexibility or the ability to enter into future strategic transactions. There are also risks to structuring and integrating any acquisition or joint venture into our operations, and we may not successfully integrate past or any future acquisitions or achieve our anticipated benefits relating to any such transactions. As a result of the risks inherent in such transactions, we cannot guarantee that any future transaction will be completed or integrated successfully, or that it will ultimately result in the realization of our anticipated benefits. Such transactions may also have a material adverse impact on our business, operations, liquidity, financial condition and results of operations.
Certain of the Company's stockholders, including Delta, CK Wheels and CIH, collectively own a substantial majority of the outstanding shares of our Common Stock, have consent or approval rights as lenders under our Term Loan and Revolving Credit Facility and have the contractual right to designate a total of nine of the twelve directors on our Board of Directors. As a result, such stockholders may exhibit significant influence over the Company and cause the Company to enter into or forego certain strategic transactions, including certain commercial and strategic transactions involving such stockholders. Such transactions may be in the form of joint ventures, the issuance of additional dilutive equity interests, the implementation of leasing structures or sale-leaseback arrangements, commercial understandings and licensing arrangements, or transactions that result in the Company's capital stock no longer being publicly traded. The announcement or consummation of any such strategic transaction may materially adversely impact our business, operations, liquidity, financial condition and results of operations, or may result in significant volatility in the market for, and trading price of, our Common Stock or the Warrants. See also "- Certain stockholders which also serve as lenders have significant influence over the Company."
Corporate Activity and Growth - Risk 3
Delta may have the right to terminate its commercial agreements with us.The CCA with Delta contemplates that we will work together with Delta each year to develop an annual joint marketing and communications plan that focuses on revenue and brand goals and co-branded event opportunities, provide certain benefits to the other's customers and share certain data. The CCA also contemplates that we will provide certain in-kind benefits to Delta, measured on an annual basis. We use reasonable best efforts to mutually agree upon the minimum amounts of in-kind benefits that we are required to provide. If we are not able to provide the minimum amounts of in-kind benefits to Delta, subject to any cure rights that we may agree with Delta, Delta will have the right to terminate the CCA and the other commercial agreements, which would have a material adverse effect on our business, results of operations and cash flows. In addition, any amendment or modification of the CCA or additional commercial agreements with Delta would require the consent of certain stockholder under the Investor Rights Agreement. Any inability to timely enter into agreements with Delta on terms favorable to the Company could adversely affect our business, cash flow, liquidity, financial condition and results of operations.
Production
Total Risks: 15/58 (26%)Above Sector Average
Manufacturing3 | 5.2%
Manufacturing - Risk 1
The operation of aircraft is subject to various risks, and our failure, or the failure of the aviation industry, to maintain an acceptable safety record may have an adverse impact on our ability to obtain and retain members and customers.Manufacturing - Risk 2
We perform certain maintenance activities internally and may be unsuccessful in balancing the mix of maintenance activities handled at our MRO facilities and by external parties, which could impact our relationships with key vendors and have an adverse effect on our future business and results of operations.We acquired MRO facilities as part of past acquisitions, and certain of the MRO activities for which we have historically relied on third parties to perform are handled at our facilities. Any increase in the amount of maintenance that we perform at our MRO facilities could adversely affect our relationships with vendors historically providing MRO services to us, from whom we expect to continue to require maintenance and other services that are in high demand. We may be unsuccessful in balancing the mix of maintenance activities handled at our MRO facilities and by external parties, or be unable to expand our MRO activities commensurate with demand, which could have an adverse effect on our future business and results of operations. In addition, performing such services in-house internalizes the risks and potential liability for the performance of such services. If maintenance is not performed properly this may lead to significant damage to aircraft, injury or loss of life, adverse publicity and legal claims against us, each of which could have an adverse impact on our business, results of operations, cash flows, financial condition and liquidity.
Manufacturing - Risk 3
We are exposed to operational disruptions due to maintenance.Our aircraft fleet requires regular maintenance work, which may cause operational disruption. Our inability to perform timely maintenance and repairs can result in our aircraft being underutilized which could have an adverse impact on our business, financial condition and results of operations. On occasion, airframe manufacturers and/or regulatory authorities require mandatory or recommended modifications to be made across a particular fleet which may mean having to ground a particular type of aircraft. This may cause operational disruption to, and impose significant costs on, us. Furthermore, our operations in remote locations, where delivery of components and parts or transportation of maintenance personnel could take a significant period of time, could result in delays in our ability to maintain and repair our aircraft. We often rely on commercial airlines to deliver such components and parts or transport maintenance personnel. Any such delays may pose a risk to our business, financial condition and results of operations. Moreover, as our fleet ages and/or if we shift the types of aircraft that comprise our fleet, our maintenance costs could potentially increase and we may be unable to manage the composition of our fleet in a manner that reduces costs due to the availability and prices for replacement aircraft and parts.
Employment / Personnel3 | 5.2%
Employment / Personnel - Risk 1
We may be subject to unionization, work stoppages, slowdowns or increased labor costs and the unionization of our pilots, maintenance workers and inflight crewmembers could result in increased labor costs.Employment / Personnel - Risk 2
The supply of pilots to the airline and private aviation industries is limited and may adversely affect our operations and financial condition. Increases in our labor costs, which constitute a substantial portion of our total operating costs, may adversely affect our business, results of operations and financial condition.Our pilots are subject to stringent pilot qualification and crew member flight training standards ("FAA Qualification Standards"), which among other things require minimum flight time for pilots, mandate strict rules to minimize pilot fatigue and require periodic recertification. The existence of such requirements effectively limits the supply of qualified pilot candidates and increases pilot salaries and related labor costs. A shortage of pilots would require us to further increase our labor costs, which would result in an increase in our operating expenses and adverse impacts to Adjusted Contribution Margin. Such requirements also impact pilot scheduling, work hours and the number of pilots required to be employed for our operations. In recent years, we have experienced significant volatility in pilot hiring and attrition, due in part to more pilots reaching retirement age and industry-related factors outside of our control. To achieve our profitability goals on the timelines previously announced, it is important that we balance the number of pilots we employ with the number of aircraft in our fleet and demand, as well as accurately forecast pilot attrition and hiring needs. If our forecasts are inaccurate and we do not effectively balance the number of pilots we employ with demand, or the supply of pilots becomes constricted, our operations and financial results could be materially and adversely affected.
In addition, our operations and financial condition may be adversely impacted if we are unable to train pilots in a timely manner. Due to an industry-wide shortage of qualified pilots, pilot training timelines have significantly increased and stressed the availability of flight simulators, instructors and related training equipment. Although we have taken measures to secure additional pilot training resources and flight simulator availability, the training of our pilots may not be accomplished in a cost-efficient manner or in a manner timely enough to support our operational needs.
Due to the flexibility on the types of aircraft and routes we offer, we may not have access to a qualified pilot at the departure location. We rely on commercial airlines to fly our pilots to the departure location. Any disruption to such commercial airline activity may cause us to delay or cancel a flight and could adversely affect our reputation, business, results of operation and financial condition. See "? Aviation businesses are often affected by factors beyond their control including: air traffic congestion at airports; airport slot restrictions; air traffic control inefficiencies; increased and changing security measures; changing regulatory and governmental requirements; new or changing travel-related taxes; any of which could have a material adverse effect on our business, results of operations and financial condition."
Employment / Personnel - Risk 3
The loss of key personnel upon whom we depend on to operate our business or the inability to attract additional qualified personnel could adversely affect our business.We believe that our future success will depend in large part on our ability to retain or attract highly qualified management, technical and other personnel. We compete against commercial and private aviation operators, including the major U.S. airlines, for pilots, mechanics and other skilled labor, and some of the airlines or private aviation operators may offer wage and benefit packages which exceed ours. We may not be successful in retaining key personnel or in attracting other highly qualified personnel. Any inability to retain or attract significant numbers of qualified management and other personnel would have a material adverse effect on our business, results of operations and financial condition.
Supply Chain6 | 10.3%
Supply Chain - Risk 1
If we face problems with any of our third-party service providers, our operations could be adversely affected.Supply Chain - Risk 2
Significant reliance on Textron aircraft, Pratt & Whitney and Rolls-Royce aircraft engines, and related spare parts poses risks to our business and prospects.As part of our business strategy, a substantial majority of our owned and leased aircraft fleet consist of Textron Aviation ("Textron") aircraft and we rely on Pratt & Whitney and Rolls-Royce aircraft engines to power our owned and leased aircraft. We have negotiated preferred rates with Textron, Pratt & Whitney, and Rolls-Royce for maintenance services, certain component repair services and to purchase and exchange parts. Parts and services from Textron, Pratt & Whitney, and Rolls-Royce are subject to their product and workmanship warranties. If any of these OEMs fail to adequately fulfill its obligations towards us or experiences interruptions or disruptions in production or provision of services due to, for example, bankruptcy, natural disasters, labor strikes or disruption of its supply chain, we may experience a significant delay in the delivery of, or fail to receive, previously ordered aircraft, engines and parts, which would adversely affect our revenue and results of operations and could jeopardize our ability to meet the demands of our program participants. In addition, if we fail to meet our obligations or are otherwise in default under the Program Agreements with Pratt & Whitney and Rolls-Royce, our access to aircraft engines and parts may become limited and we may experience adverse consequences under the agreements governing our indebtedness, each of which could adversely impact our business, operations, cash flow, liquidity, and financial condition . Although we could choose to operate aircraft of other manufacturers or increase our reliance on third-party operators, such a change would involve substantial expense to us and could disrupt our business activities.
Supply Chain - Risk 3
Some of our business is dependent on our third-party operators to provide flights for our members and customers. If such third-party operators do not perform adequately or terminate their relationships with us, our costs may increase and our business, operations, liquidity, financial condition and results of operations could be adversely affected.While we operate a significant portion of the flights for our members and customers, we also rely on our ability to source charter services to service a portion of member and customer demand as part of our "asset right" fleet strategy. For the year ended December 31, 2023, approximately 30% of our revenue generating flights were fulfilled by third-party aircraft operators on our behalf, of which a majority were with our fifteen most frequently used partners. We expect that charter services will continue to be a significant part of our operating model to supplement our capabilities. We face the risk that any of our third-party operators may not fulfill their contracts and deliver their services on a timely basis, or at all, due to, among other factors: financial difficulty or damage to their operations caused by fire, terrorist attack, natural disaster, pandemic or other events; the inability to hire or retain skilled personnel, including pilots and maintenance personnel; and other disruptions to their operations.
Several of these third-party operators provide significant capacity that, despite our expanded network of charter partners as a result of our acquisition of Air Partner, we may be unable to replace in a short period of time should that operator fail to perform its obligations to us. In addition, due to aircraft supply constraints across the industry, we may be required to pay more for capacity with our third-party operators to service customer or member flights. The failure of any third-party operators to perform to our expectations could result in delayed or cancelled flights or service credits, and harm the applicable portion of our business and customer relationships. Our reliance on third-party operators and our inability to fully control any operational difficulties or increased costs with our third-party operators could have a material adverse effect on the portion of our business where we use third-party operators, as well as our liquidity, financial condition and results of operations. Any significant disruption to our operations as a result of problems with any of our third-party aircraft operators would have an adverse effect on our business, liquidity, financial condition and results of operations.
In recent years there has been an increase in the number of competitors that have established, or have attempted to establish, cooperative or strategic relationships with third-party aircraft operators in the markets we serve. We have also entered into certain of such agreements. We may not be able to secure the necessary number of aircraft at attractive prices to achieve our planned growth if our competitors offer third-party aircraft operators more attractive rates or guarantee a higher volume of flights than we have historically offered. While we believe that we will be able to secure replacement supply due to Air Partner's extensive network of charter partners, if we are unable to add new or replacement operators over time, our business and results of operations could be adversely affected while we seek alternatives. As the private aviation market grows, we expect competition for third-party aircraft operators and the use of exclusive contractual arrangements with third-party aircraft operators to increase, which may result in market acceptance of certain volume guarantees and prepayments or deposits. This may require us to incur significant capital or operating expenditures, in each case which may adversely impact our business, results of operations and financial condition.
In addition, we have entered into agreements with contractors to provide various facilities and services required for our operations. Union strikes or staff shortages among airport workers or certain pilots of third-party aircraft operators may result in disruptions of our operations and could have a material adverse effect on some of our business, results of operations and financial condition. Because we rely on others to provide such services, our ability to control the efficiency and timeliness of such services is limited. Any material problems with the efficiency, timeliness or availability of contract services, resulting from financial hardships or otherwise, could have a material adverse effect on our business, results of operations and financial condition.
Supply Chain - Risk 4
We rely on third parties maintaining open marketplaces to distribute our mobile and web applications and to provide the software we use in certain of our products and offerings, including the provision of the flight management system we utilize. If such third parties interfere with the distribution of our products or offerings, with our use of such software, or with the interoperability of our platform with such software, our business would be adversely affected.Our platform's mobile applications rely on third parties maintaining open marketplaces, which make applications available for download. We cannot be assured that the marketplaces through which we distribute our applications will maintain their current structures or that such marketplaces will not charge us fees to list our applications for download.
We rely upon certain third-party software and integrations with certain third-party applications to provide our platform and products and service offerings. As our offerings expand and evolve, we may use additional third-party software or have an increasing number of integrations with other third-party applications, software, products and services. Third-party applications, software, products and services are constantly evolving, and we may not be able to maintain or modify our platform, including our mobile and web-based applications and UP FMS, to ensure its compatibility with third-party offerings following development changes. Moreover, some of our competitors or technology partners may take actions which disrupt the interoperability of our offerings with their own products or services, or exert strong business influence on our ability to, and the terms on which we, operate our platform and provide our products and service offerings to members and customers.
In addition, if any of our third-party providers cease to provide access to the third-party software that we use, do not provide access to such software on terms that we believe to be attractive or reasonable, do not provide us with the most current version of such software, modify their products, standards or terms of use in a manner that degrades the functionality or performance of our platform or is otherwise unsatisfactory to us or gives preferential treatment to competitive products or services, we may be required to seek comparable software from other sources, which may be more expensive or inferior, or may not be available at all. Any of these events could adversely affect our business, financial condition and results of operations.
Supply Chain - Risk 5
We rely on third-party Internet, mobile, and other products and services to deliver our mobile and web applications and facilitate our flight management systems, and any disruption of, or interference with, our use of those services could adversely affect our business, financial condition, results of operations and customers.The continuing and uninterrupted performance of our mobile and web-based applications, UP FMS, and cloud infrastructure services provided by a third party is critical to our success. While we have engaged reputable vendors to provide certain of these products or services, we do not have control over the operations of the facilities or systems used by our third-party providers. These facilities and systems may be vulnerable to damage or interruption from natural disasters, cybersecurity attacks, human error, terrorist attacks, power outages, pandemics and similar events or acts of misconduct. In addition, any changes in one of our third-party service provider's service levels may adversely affect our ability to meet the requirements of our customers or needs of our employees. While we believe we have implemented reasonable backup and disaster recovery plans, we have experienced, and expect that in the future we will continue to experience, interruptions, delays and outages in service and availability from time to time due to a variety of factors, including infrastructure changes, human or software errors, website hosting disruptions, capacity constraints or external factors beyond our control. Sustained or repeated system failures would reduce the attractiveness of our offerings and could disrupt our customers', suppliers', third-party vendors' and aircraft providers' businesses. It may become increasingly difficult to maintain and improve our performance, especially during peak usage times, as we expand our products and service offerings. Any adverse publicity or user dissatisfaction arising from these disruptions could harm our reputation and brand, adversely affect the usage of our offerings, and harm our business, financial condition and results of operation.
Supply Chain - Risk 6
Our obligations in connection with our contractual agreements, including operating leases and debt financing obligations, could impair our liquidity and thereby harm our business, results of operations and financial condition.We have significant contractual obligations, including operating leases and debt financing obligations. We expect to incur additional obligations as we continue to develop and enhance our business and operations. We lease aircraft under long-term operating leases that include either fixed or variable rate lease payments and include certain return and end-of-lease conditions that we are obligated to satisfy upon expiration or termination of an aircraft lease, which may result in substantial payments by the Company for the benefit of the aircraft owner in the event of expiration or termination of a lease. We also have contractual obligations to perform services in the future for which we have already received deferred revenue from our members and customers, which require that we have sufficient levels of working capital and liquidity on-hand in the future to perform such services.
Our debt obligations include the Equipment Notes issued by WUP LLC, an indirect subsidiary of the Company, which as of December 31, 2023 were secured by 122 of the Company's owned aircraft fleet and certain intellectual property assets of the Company and certain of its subsidiaries, and a Term Loan under the Credit Agreement, which is secured by a first-priority lien on unencumbered assets of the Company and its direct and indirect subsidiaries (excluding certain assets) and a junior lien on the Equipment Note Collateral.
As of December 31, 2023, $214.9 million aggregate principal amount of the Equipment Notes was outstanding, with a weighted average remaining maturity of 3.3 years. The Equipment Notes bear interest at the rate of 12% per annum with annual amortization of the principal amount equal to 10% per annum and balloon payments due at each maturity date, all of which are payable in cash. The Equipment Note for a given aircraft may be redeemed by WUP LLC prior to its stated maturity date for any reason or in connection with a sale of the aircraft at a redemption price that includes, among others, certain make-whole amounts and premiums. WUP LLC is also required to redeem a portion of the Equipment Notes and pay associated make-whole amounts and premiums upon an inability to meet certain loan to appraised aircraft value ratio thresholds for all aircraft financed or upon the repayment of certain junior indebtedness such that the weighted average life of such junior indebtedness is less than the weighted average life of the Equipment Notes.
As of December 31, 2023, $400.5 million aggregate principal amount of the Term Loan was outstanding, including paid-in-kind interest. Interest on the Term Loan and any borrowings under the Revolving Credit Facility accrue at a rate of 10% per annum on the unpaid principal balance of the loans then outstanding, and is payable in kind as compounded interest and capitalized to the principal amount of the applicable loan at the end of each calendar quarter and on the applicable maturity date. The scheduled maturity date for the Term Loan is September 20, 2028. In addition, we have received commitments from Delta for the Revolving Credit Facility in the aggregate original principal amount of $100.0 million, which may be drawn under certain circumstances and is subject to certain prepayment requirements. As of December 31, 2023, no amounts were outstanding under the Revolving Credit Facility. The scheduled maturity date for the Revolving Credit Facility is the earlier of September 20, 2028 and the first date after September 20, 2025, on which all amounts owed with respect to borrowings under the Revolving Credit Facility have been repaid.
Our ability to timely pay our contractual obligations as they come due, including under our operating leases, the Equipment Notes, the Term Loan and the Revolving Credit Facility, or to perform our obligation to provide services for which we have already received deferred revenue from our members and customers, will depend on, among other things, our run-rate results of operations, cash flow, liquidity and/or ability to obtain additional financing. We cannot provide assurances that our operations will generate sufficient cash flow to make any required payments as they come due, including payments under any existing or future debt obligations or to fund our working capital needs, or that we will be able to obtain additional financing in the future to fund our operations and pursuit of our strategic business initiatives. Any inability to satisfy our contractual obligations as they come due, including to timely refinance our debt obligations on terms we deem attractive or at all, and maintain sufficient levels of working capital could have a material adverse effect on our business, results of operations and financial condition, or require the Company to seek strategic alternatives that may not be favorable to stockholders, including under bankruptcy or insolvency laws.
Costs3 | 5.2%
Costs - Risk 1
Our insurance may become too difficult or expensive to obtain. If we are unable to maintain sufficient insurance coverage, it may materially and adversely impact our results of operations and financial position.Costs - Risk 2
We may incur substantial costs in connection with our leased aircraft, including for return obligations.Our aircraft lease agreements generally have multi-year terms and may require us to cover all or a portion of the maintenance costs associated with the aircraft. In addition, our aircraft leases may contain provisions that require us to return aircraft airframes and engines to the lessor in a specified condition or pay an amount to the lessor based on the actual return condition of the equipment. These lease return costs are recorded in the period in which they are incurred. We estimate the cost of maintenance lease return obligations and accrue such costs over the remaining lease term when the expense is probable and can be reasonably estimated. Any unexpected increase in lease return costs may adversely impact our financial position and results of operations. In addition, any other costs or notice requirements associated with the termination or expiration of an aircraft lease may result in significant financial payments or limit our ability to strategically optimize our fleet, which may adversely impact our cost and fleet optimization initiatives.
Costs - Risk 3
Significant increases in fuel costs could have a material adverse effect on our business, financial condition and results of operations.Fuel is essential to the operation of our aircraft and to our ability to carry out our transport services. Fuel costs are a key component of our operating expenses. A significant increase in fuel costs may impact flight activity by our members and customers, and otherwise adversely impact our revenue, operating expenses and results of operations, including Adjusted Contribution Margin. Pursuant to our agreements with members, members pay an indexed fuel surcharge that is applied when the cost of cost of Jet A fuel, as published by the Argus U.S. Jet Fuel IndexTM, is more than $2.00 per gallon and is calculated based on estimated billable flight time. Given our contractual ability to pass on increased fuel costs, in whole or in part, to certain of our customers and mitigate the risk with others, we do not maintain hedging arrangements for the price of fuel. However, increased fuel surcharges may adversely affect our member retention, the demand for flight services and revenue if a prolonged period of high fuel costs occurs. In addition, potential increased environmental regulations that might require new fuel sources (e.g., sustainable aviation fuel) could lead to increased costs. To the extent there is a significant increase in fuel costs that affects the costs of our flight operations or the amount our customers and members choose to fly with us, it may have a material adverse effect on our business, operations, liquidity, financial condition and results of operations.
Legal & Regulatory
Total Risks: 6/58 (10%)Below Sector Average
Regulation1 | 1.7%
Regulation - Risk 1
We are subject to significant governmental regulation and changes in government regulations imposing additional requirements and restrictions on our operations could increase our operating costs and result in service delays and disruptions.Litigation & Legal Liabilities2 | 3.4%
Litigation & Legal Liabilities - Risk 1
We may become involved in litigation or other legal proceedings that may materially adversely affect us.Litigation & Legal Liabilities - Risk 2
We may be subject to securities litigation, which could cause us to incur substantial costs and could divert management's attention and resources.The market price of our Common Stock may be volatile and, in the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. Securities-related claims and litigation may also arise in connection with past transactions or actions taken by the Board or management, as well as related to past reports filed with the SEC. We have been a target of this type of litigation in the past and are currently defending certain securities claims.
In addition, we may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert management's attention from other business concerns, which could seriously harm our business. We dispute the claims that have been asserted against us and intend to vigorously defend against them. Litigation, however, is inherently uncertain, and we are unable to predict the outcome or to estimate the range of loss, if any, that could result from an unfavorable outcome. Any adverse judgment against the Company, the Board or management not covered by applicable insurance policies may have a material adverse effect on our liquidity and financial condition, or could harm our reputation in a manner that adversely impacts our business and results of operations for an indefinite period.
Environmental / Social3 | 5.2%
Environmental / Social - Risk 1
Environmental regulation and liabilities, including new or developing laws and regulations, or our initiatives in response to pressure from our stakeholders may increase our costs of operations and adversely affect us.Environmental / Social - Risk 2
We are subject to various environmental and noise laws and regulations, which could have a material adverse effect on our business, results of operations and financial condition.We are subject to increasingly stringent federal, state, local and foreign laws, regulations and ordinances relating to, among other things, the protection of the environment and noise, including those relating to emissions to the air and the use, management, disposal and release of, and exposure to, hazardous substances, oils and waste materials. We are or may be subject to new or proposed laws and regulations that may have a direct effect, or indirect effect through our third-party specialists or airport facilities at which we operate, on our operations,including related to the environment, climate change and related reporting. Any such existing, new or potential laws and regulations could have an adverse impact on our business, results of operations and financial condition.
Environmental / Social - Risk 3
Because we use software to collect and store personal information, privacy concerns in the territories in which we operate could result in additional costs and liabilities to us.The regulatory framework for privacy issues worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. Many government bodies and agencies have adopted or are considering adopting laws and regulations regarding the collection, use, storage and disclosure of personal information and breach notification procedures. We are also required to comply with laws, rules and regulations relating to data security. Interpretation of these laws, rules and regulations and their application to our software and professional services in applicable jurisdictions is ongoing and cannot be fully determined at this time.
The following restrictions and future laws and regulations could increase our exposure to regulatory enforcement action, increase our compliance costs, and adversely affect our business:
- In the U.S., these include rules and regulations promulgated under the authority of the Federal Trade Commission, the Electronic Communications Privacy Act, the Computer Fraud and Abuse Act, and the CCPA and other state and federal laws relating to privacy and data security. Certain of the laws require disclosures about the use of personal information, require users to be able to opt out of information sharing, create causes of actions for data breaches and/or include significant enforcement and penalty regimes. There is some uncertainty as to how the CCPA, and similar privacy laws emerging in other states, could impact our business as it depends on how such laws will be interpreted.
- Outside the U.S., an increasing number of laws, regulations, and industry standards apply to data privacy and security. For example, the GDPR, took effect in the European Union ("EU") on May 25, 2018. Following the withdrawal of the United Kingdom ("UK") from the EU, the UK continues to generally apply GDPR in a substantially equivalent form. The GDPR increased covered businesses' data privacy and security obligations and imposed stringent data privacy and security requirements, including, for example, detailed notices about how such businesses process personal data, the implementation of security measures,mandatory security breach notification requirements, contractual data protection requirements on data processors and limitations on the retention of records of personal data processing activities.
We expect to continue to devote significant time and resources to complying with emerging data privacy and information security laws, rules and regulations. Any failure to comply with applicable laws, rules and regulations related to data security to which we are subject or may in the future be subject to could result in, among other things, regulatory proceedings or disputes or litigation against us, losses, damages and fines, or may harm our reputation and adversely affect our business, liquidity, financial condition and results of operations.
Ability to Sell
Total Risks: 6/58 (10%)Below Sector Average
Competition1 | 1.7%
Competition - Risk 1
The private aviation industry is subject to competition.Demand1 | 1.7%
Demand - Risk 1
We are exposed to the risk of a decrease in demand for private aviation services.Sales & Marketing1 | 1.7%
Sales & Marketing - Risk 1
Any failure to offer high-quality customer support may harm our relationships with our customers and members and could adversely affect our reputation, brand, business, financial condition and results of operations.Brand / Reputation3 | 5.2%
Brand / Reputation - Risk 1
If our efforts to continue to build our strong brand identity and improve member satisfaction and loyalty are not successful, we may not be able to attract or retain members and customers, and our operating results may be adversely affected.Brand / Reputation - Risk 2
Any damage to our reputation or brand image could adversely affect our business or financial results.Maintaining a good reputation globally is critical to our business. Our reputation or brand image could be adversely impacted by, among other things, any failure to maintain high ethical, social and environmental sustainability practices for all of our operations and activities, our impact on the environment, public pressure from investors or policy groups to change our policies, customer perceptions of our advertising campaigns, sponsorship arrangements or marketing programs, customer perceptions of our use of social media, or customer perceptions of statements made by us, our employees and officers, agents or other third-parties. In addition, we operate in a highly visible industry that has significant exposure to social media. Any change in public perception of the private aviation industry due to perceived adverse impacts on the environment and climate change may have an adverse impact on the demand for our products, services and reputations, which could adversely affect our business, results of operations and financial condition. Should we not respond in a timely and appropriate manner to address adverse publicity, our brand and reputation may be significantly harmed. Damage to our reputation or brand image or loss of customer confidence in our services could adversely affect our business and financial results as well as require additional resources to rebuild or repair our reputation.
Brand / Reputation - Risk 3
We could suffer losses and adverse publicity stemming from any accident involving our aircraft models operated by third parties.Certain aircraft models that we operate have experienced accidents while operated by third parties. If other operators experience accidents with aircraft models that we operate, obligating us to take such aircraft out of service until the cause of the accident is determined and rectified, we may lose revenues and customers. It is also possible that the FAA or other regulatory bodies in another country could ground a model of aircraft that we fly and restrict it from flying in their airspace. In addition, safety issues experienced by a particular model of aircraft could result in customers refusing to use that particular aircraft model or a regulatory body grounding that particular aircraft model. The value of the aircraft model might also be permanently reduced in the secondary market if the model were to be considered less desirable for future service, which may adversely impact our ability to comply with certain covenants under the agreements governing our indebtedness or require us to post additional collateral to comply with such covenants. Such accidents or safety issues related to aircraft models that we operate could have a material adverse effect on our business, financial condition and results of operations.
Macro & Political
Total Risks: 5/58 (9%)Below Sector Average
International Operations1 | 1.7%
International Operations - Risk 1
Our business is primarily focused on certain targeted geographic regions making us vulnerable to risks associated with having geographically concentrated operations.Natural and Human Disruptions4 | 6.9%
Natural and Human Disruptions - Risk 1
Terrorist activities, geopolitical hostilities or other security events may adversely impact our business, financial condition and results of operations.Natural and Human Disruptions - Risk 2
We are subject to risks associated with climate change, including the potential increased impacts of severe weather events on our operations and infrastructure.Climate change-related regulatory activity and developments requiring us to reduce our emissions, make capital investments to modernize certain aspects of our operations, purchase carbon offsets or sustainable aviation fuel, or otherwise pay for our emissions may increase our operating costs and divert management's attention and resources which may have an adverse effect on our business and financial results, including our Adjusted Contribution Margin and Adjusted EBITDA.
The potential physical effects of climate change, such as increased frequency and severity of storms, floods, fires, fog, mist, freezing conditions, sea-level rise and other climate-related events, could affect our operations, infrastructure, and financial results. Operational impacts, such as the delay or cancellation of flights, could result in loss of revenue, decreased demand for our products and services, and reputational harm. In addition, certain airports that we frequently utilize and certain of our facilities are in locations susceptible to the impacts of storm-related flooding, sea-level rise and other climate-related events, which could result in increased costs and loss of revenue in those locations. We could incur significant costs to improve the climate resiliency of our infrastructure and otherwise prepare for, respond to, and mitigate such physical effects of climate change on our operations. We are not able to accurately predict the materiality of any potential losses or costs associated with the physical effects of climate change.
Natural and Human Disruptions - Risk 3
Extreme weather, natural disasters and other adverse events could have a material adverse effect on our business, results of operations and financial condition.Adverse weather conditions and natural disasters, such as hurricanes, winter snowstorms or earthquakes, can cause flight cancellations or significant delays. We frequently fly to small or non-primary airports without a commercial airline presence, which may not maintain the level of preparedness to continue operations during such events. Cancellations or delays due to adverse weather conditions or natural disasters, air traffic control problems or inefficiencies, breaches in security or other factors may affect us to a greater degree than our competitors who may be able to recover more quickly from these events, and therefore could have a material adverse effect on our business, results of operations and financial condition to a greater degree than other air carriers. Any general reduction in flight volumes could have a material adverse effect on our business, results of operations and financial condition.
Natural and Human Disruptions - Risk 4
Aviation businesses are often affected by factors beyond their control including: air traffic congestion at airports; airport slot restrictions; air traffic control inefficiencies; increased and changing security measures; changing regulatory and governmental requirements; new or changing travel-related taxes; any of which could have a material adverse effect on our business, results of operations and financial condition.Like other aviation companies, our business is affected by factors beyond our control, including air traffic congestion at airports, airport slot restrictions, air traffic control inefficiencies and staffing shortages, increased and changing security measures, changing regulatory and governmental requirements, and new or changing travel-related taxes. Factors that cause flight delays frustrate passengers and increase operating costs and decrease revenues, which in turn could adversely affect demand for our products and services and profitability. Any general reduction in flight volumes could have a material adverse effect on our business, results of operations and financial condition.
In the U.S., the federal government singularly controls all U.S. airspace, and aviation operators are completely dependent on the FAA to operate that airspace in a safe, efficient and affordable manner. The expansion of our business into international markets involves a greater degree of interaction with the regulatory authorities of the foreign countries in which we may operate. The air traffic control system, which is operated by the FAA, in the U.S., faces challenges in managing the growing demand for U.S. air travel and attracting air traffic controllers. U.S. and foreign air-traffic controllers rely on outdated technologies that routinely overwhelm the system and compel aviation operators to fly inefficient, indirect routes resulting in delays and increased operational cost. For example, in January 2023, the FAA experienced an unexpected technical system outage that resulted in all domestic commercial air traffic being temporarily grounded for several hours, which adversely impacted airlines and private aviation industry operators during the duration of the outage. There have also been recent instances where understaffing of certain U.S. and foreign air traffic control systems have led to flight delays and cancellations and resulted in significant costs to aviation operators. These instances are capable of repetition and may harm our business and results of operations in the future.
In addition, future changes to U.S. or international air traffic control systems or protocols could lead to increased costs, legal issues or operational inefficiencies, in each case which adversely impact our business and results of operations.
Tech & Innovation
Total Risks: 3/58 (5%)Below Sector Average
Trade Secrets1 | 1.7%
Trade Secrets - Risk 1
If we are unable to adequately protect our intellectual property interests or are found to be infringing on intellectual property interests of others, we may incur significant expense and our business may be adversely affected.Cyber Security1 | 1.7%
Cyber Security - Risk 1
A failure in our technology or breaches of the security of our information technology infrastructure may harm our reputation and adversely affect our business and financial condition.Technology1 | 1.7%
Technology - Risk 1
A delay or failure to identify and devise, invest in and implement certain important technology, business and other initiatives could have a material adverse impact on our business, financial condition and results of operations.See a full breakdown of risk according to category and subcategory. The list starts with the category with the most risk. Click on subcategories to read relevant extracts from the most recent report.
FAQ
What are “Risk Factors”?
Risk factors are any situations or occurrences that could make investing in a company risky.
The Securities and Exchange Commission (SEC) requires that publicly traded companies disclose their most significant risk factors. This is so that potential investors can consider any risks before they make an investment.
They also offer companies protection, as a company can use risk factors as liability protection. This could happen if a company underperforms and investors take legal action as a result.
It is worth noting that smaller companies, that is those with a public float of under $75 million on the last business day, do not have to include risk factors in their 10-K and 10-Q forms, although some may choose to do so.
How do companies disclose their risk factors?
Publicly traded companies initially disclose their risk factors to the SEC through their S-1 filings as part of the IPO process.
Additionally, companies must provide a complete list of risk factors in their Annual Reports (Form 10-K) or (Form 20-F) for “foreign private issuers”.
Quarterly Reports also include a section on risk factors (Form 10-Q) where companies are only required to update any changes since the previous report.
According to the SEC, risk factors should be reported concisely, logically and in “plain English” so investors can understand them.
How can I use TipRanks risk factors in my stock research?
Use the Risk Factors tab to get data about the risk factors of any company in which you are considering investing.
You can easily see the most significant risks a company is facing. Additionally, you can find out which risk factors a company has added, removed or adjusted since its previous disclosure. You can also see how a company’s risk factors compare to others in its sector.
Without reading company reports or participating in conference calls, you would most likely not have access to this sort of information, which is usually not included in press releases or other public announcements.
A simplified analysis of risk factors is unique to TipRanks.
What are all the risk factor categories?
TipRanks has identified 6 major categories of risk factors and a number of subcategories for each. You can see how these categories are broken down in the list below.
1. Financial & Corporate
- Accounting & Financial Operations - risks related to accounting loss, value of intangible assets, financial statements, value of intangible assets, financial reporting, estimates, guidance, company profitability, dividends, fluctuating results.
- Share Price & Shareholder Rights – risks related to things that impact share prices and the rights of shareholders, including analyst ratings, major shareholder activity, trade volatility, liquidity of shares, anti-takeover provisions, international listing, dual listing.
- Debt & Financing – risks related to debt, funding, financing and interest rates, financial investments.
- Corporate Activity and Growth – risks related to restructuring, M&As, joint ventures, execution of corporate strategy, strategic alliances.
2. Legal & Regulatory
- Litigation and Legal Liabilities – risks related to litigation/ lawsuits against the company.
- Regulation – risks related to compliance, GDPR, and new legislation.
- Environmental / Social – risks related to environmental regulation and to data privacy.
- Taxation & Government Incentives – risks related to taxation and changes in government incentives.
3. Production
- Costs – risks related to costs of production including commodity prices, future contracts, inventory.
- Supply Chain – risks related to the company’s suppliers.
- Manufacturing – risks related to the company’s manufacturing process including product quality and product recalls.
- Human Capital – risks related to recruitment, training and retention of key employees, employee relationships & unions labor disputes, pension, and post retirement benefits, medical, health and welfare benefits, employee misconduct, employee litigation.
4. Technology & Innovation
- Innovation / R&D – risks related to innovation and new product development.
- Technology – risks related to the company’s reliance on technology.
- Cyber Security – risks related to securing the company’s digital assets and from cyber attacks.
- Trade Secrets & Patents – risks related to the company’s ability to protect its intellectual property and to infringement claims against the company as well as piracy and unlicensed copying.
5. Ability to Sell
- Demand – risks related to the demand of the company’s goods and services including seasonality, reliance on key customers.
- Competition – risks related to the company’s competition including substitutes.
- Sales & Marketing – risks related to sales, marketing, and distribution channels, pricing, and market penetration.
- Brand & Reputation – risks related to the company’s brand and reputation.
6. Macro & Political
- Economy & Political Environment – risks related to changes in economic and political conditions.
- Natural and Human Disruptions – risks related to catastrophes, floods, storms, terror, earthquakes, coronavirus pandemic/COVID-19.
- International Operations – risks related to the global nature of the company.
- Capital Markets – risks related to exchange rates and trade, cryptocurrency.