#91 George Mattson, Wheels Up: The integrated customer experience

In this episode, we sit down with George Mattson, CEO of Wheels Up, for a conversation about leading one of the most recognized brands in private aviation. George shares his perspective on building Wheels Up into an aviation solutions company and what sets their model apart in a competitive industry. With his background on the board of Delta Airlines, he offers a unique lens on integrating commercial and private aviation to create a seamless customer experience.

We explore the current landscape of private aviation, its opportunities, headwinds, and the strategic thinking behind Wheels Up’s direction. George also opens up about the realities of being a CEO in aviation: what a typical day looks like, how his expectations have evolved, and what leadership means in this fast-moving space. The conversation wraps with his outlook on the future of aviation, including thoughts on advanced air mobility and where innovation is headed.

Chapters

• 4:41 Disrupting Private Aviation Norms
• 8:22 Expanding the Market for Private Aviation
• 9:11 Merging Commercial and Private Aviation
• 11:14 The Wheels Up / Delta Competitive Advantage
• 15:37 Private Aviation Industry Overview
• 22:44 Wheels Up Strategy and Evolution
• 31:24 Wheels Up and COVID
• 36:36 Getting A Little Bit Better Every Day
• 38:02 Impact of COVID-19 on private aviation
• 42:11 Operational Excellence and Future Plans
• 44:45 Achieving Higher Utilization: Key Factors
• 47:59 The Role of Technology in Operational Efficiency
• 51:59 Vision for Wheels Up Success
• 56:29 Leadership Insights: Being a CEO
• 1:00:58 What George Sees In Great CEOs and Leaders
• 1:06:03 Customer Insights and Market Segmentation
• 1:09:45 Future of Aviation and Urban Air Mobility
• 1:14:16 Impact of Economic Changes on Wheels Up
• 1:15:10 Closing Remarks and Audience Engagement

Transcript

George: 0:00

Well, I think ultimately the whole goal here is to attract more people to our industry. You know, some studies have been done, that suggest that the vast majority of people, and I've heard a number as high as 90% of people who can afford to fly private, have never flown private. And so if that's true, why is that? And I think the answer is that, to this point, accessing this industry is a little confusing. Who do I work with? What do I do? Am I really a private aviation prospect or a customer? How do I integrate this into my travel patterns? Am I really ready to go from not flying private to a very broad and expensive, approach. And where are those people sitting today? Well, I think they're sitting in the front of the cabin at places like Delta Airlines and elsewhere. We're trying to introduce the idea of sensible private aviation travel, and those are two words you don't often hear in the same sentence, but there are use cases and trips where it makes sense to select a private aviation alternative for certain customers.

Jim: 2:05

Hey everybody welcome back to The Vertical Space and our conversation with George Mattson, Chief Executive Officer of Wheels Up. So George brings a CEO's perspective to running a large aviation company. We start our conversation around the Wheels Up vision as an aviation solutions company and listen to how he believes this is unique in the industry. George then provides an overview of the private aviation industry, its opportunities and challenges. We then discuss his Wheels Up experience coming over for many years on the board of directors of Delta Air Lines, who have a sizable investment in Wheels Up. Listen to their vision of the integrated customer experience, tying together commercial and private aviation for their combined customers. And I'm sure you'll ask why this hasn't been done before. We ask the same question in our discussion. And then something we always like to discuss with CEOs what's it like being a CEO and the CEO of an aviation company. What he focuses on a day in the life and his expectations coming over from Delta and how those expectations may have changed. Finally, we talk about George's vision of the future of aviation including his perspective on advanced air mobility. By way of background, as I mentioned, George is Wheels Up CEO and was a longstanding member of the Delta Board of Directors. He previously served as a partner and co-head of the Global Industrials Group in Investment Banking at Goldman Sachs from 2002 to 2012, during which time his responsibilities included oversight of the transportation and airline practices. George holds a Bachelor of Science degree in electrical engineering from Duke University and an MBA from the Wharton School of the University of Pennsylvania. George, thanks for a great discussion and a fresh perspective. And to our listeners, we hope you enjoy our talk with George Mattson as you profitably innovate in The Vertical Space. Hey, George Mattson, welcome to The Vertical Space. It's a great honor having you with us.

George: 4:38

Thank you, Jim. It's great to be here.

Jim: 4:41

All right, so our first question, which we ask all guests, is there anything that very few in the industry agree with you on.

George: 4:47

Well, it's a great first question, Jim. hopefully they get easier from here, but you know, I, I would say that, we are I'd say disrupting some norms and changing some ways people think about our industry, that being private aviation, we're trying to make private aviation more sensible to people, more understandable, more accessible. When you think about the partnership that we've announced and are executing, an important, plan around with Delta Air Lines. it's about this idea of providing customers with aviation solutions, aviation solutions that span across commercial and private. If you think about the industry sort of since the beginning of time when that first airplane rolled down the dirt runway in Kitty Hawk, you know, private aviation and commercial aviation have existed in entirely separate ecosystems, and there's a certain segment of common customer we have that accesses both modes of transportation. So why have these things existed entirely separately? And when you think about private aviation itself. One of the things that really attracted me to this opportunity was the lack of innovation that our industry has really, I think, been guilty of for many, many years. If you look at private aviation, it's kind of looked about the same for the last 20, 30 years, which is to say the vast majority of aircraft are still wholly owned by corporations and individuals and those that are not wholly owned, the vast majority of that subset is fractionalized. Now, what is a fraction of an aircraft? It's, it's a hammer and everything's a nail, right? It's let me buy a piece of an airplane that I will use for all of my private aviation needs. I will use it a fixed number of hours per year for multiple years in a row. I will use it on every trip, whether it's a trip from New York to Martha's Vineyard, or a trip from New York to Los Angeles. And I'll be sort of beholden to this tool in my toolkit. Well, we're trying to build an entire toolkit for people, a toolkit that spans across commercial and private aviation within private aviation, from turbo props to transcontinental or global jets, whether it's on my fleet or, or not on my fleet asset light charter. And this mindset of trying to really give customers the tools to choose how they fly private, I don't think is something everybody agrees with me on today, because it's not how the industry's currently structured, but it's where we're trying to take things.

Jim: 7:09

I like that. I, it's a, it's a fresh approach. So it's kind of the merging of the commercial with the business aviation. And you kind of have to ask yourself, why hasn't it been done in the past?

George: 7:21

Yeah. Look, I, I think it's hard. I think what we're trying to do is hard and it's disrupting norms. Look, as the, as a company, it's easier frankly to. So to, sell, a piece of an airplane and have my, my customers expend the capital for that. This more customer centric approach and model is hard to do. We believe it's doable. but it took somebody to sort of step in and, and try it and, and we, I think along with the best partner we possibly could have asked for in Delta Air Lines, we think are the right two companies to try it. Wheels Up has had a long heritage of being innovative and disruptive in the space, and we're really just taking that in a new and different direction, but with the same mindset of customer centricity and really driving a solution that puts the tools in the hands of the customer to decide how and when they want to use it. And how often.

Luka: 8:12

And so, just so I understand, George, the contrarian view here is in a different perspective on the customer and the customer experience, or is it in the business model?

George: 8:22

Well, I think ultimately the whole goal here is to attract more people to our industry. You know, some studies have been done, that suggest that the vast majority of people, and I've heard a number as high as 90% of people who can afford to fly private, have never flown private. And so if that's true, why is that? And I think the answer is that, to this point, accessing this industry is a little confusing. Who do I work with? What do I do? Am I really a private aviation prospect or a customer? How do I integrate this into my travel patterns? Am I really ready to go from not flying private to, a, a very broad and expensive, approach. And, and where are those people sitting today? Well, I think they're sitting in the front of the cabin at places like Delta Airlines and elsewhere. And it's not binary. It's not either or. We're trying to introduce the idea of sensible private aviation travel, and those are two words you don't often hear in the same sentence, but there are use cases and trips where it makes sense to select a private aviation alternative for certain customers. Whether those are leisure trips or business trips. There are certain trips that make more sense than others. I'm sitting here in Atlanta and our global headquarters and operations center. If I needed to go to New York tomorrow and Delta has 15 flights to New York and I'm by myself. Well, why not fly Delta? Of course we're happy to take you, but if instead I'm traveling with my management team and I'm going to visit customers, operations, plants, investors, and I can make a five day trip into a three day trip if I need to go to Europe and instead of getting off Delta one and getting onto a European commercial carrier and trying to figure out how to get all over Europe for a few days, why don't I go down a set of stairs for that last mile, of the trip to be efficient and shorten that trip by, by two days if I have a home and a place that's gonna take me a connection or two to get to, and I can extend my family vacation by 50 or a hundred percent in terms of my amount of time. So we're trying to get people to really think about cost benefit around private aviation as well. and in that sense we're trying to cr create a framework that I think people really haven't thought of, in this way before.

Jim: 10:31

I like it. I like the overall aviation solution and I like the idea that yes, they've always been two different worlds. Why not bring those worlds together? And to some degree, we'll talk about this later, but to some degree that's what some of the airlines are trying to do with advanced Air Mobility as well. Create this more complete solution. And obviously Delta has talked about that, too. The other thing that's really intriguing, and we'll talk about the Delta relationship later, but you introduced it very early on as part of the solution. I mean, they have an enormous number, of, people who potentially could fly as well. And Ed Bastian has talked about the passengers that they have who could access the Wheels Up experience. What a tremendous competitive advantage you have there.

George: 11:14

Yeah. You know, Jim, on that point, I mean, among the many things that got me very excited in taking on this role, from a strategic point of view as I just described, I think from a purely commercial lens as well, we just have an enormous opportunity working so closely in partnership with Delta. You think about our company today, we have about 10,000 customers. About 5,000 of those are members flying programmatically in the US on our owned operated fleet, and about 5,000 of those customers are global charter customers. You start thinking about the Delta addressable market. You know, Delta has about 45,000 corporate customers. Many, many of those customers already fly private, some don't. But obviously with Delta's support and given Delta's important relationship with those customers, we're gonna have a real advantage and engaging with those 45,000 customers and adding them to our mix of 10,000 customers today. You know, and then you go from the core corporate side to the leisure individual side. You think about the Delta skymile program. Delta has about 20 million active members of their skymile program. And so if you just, and we've done some data work that that's more precise than this, but if you just took a swag and you said, okay, let's say a half a percent of those 20 million people are private aviation, either existing customers or prospects. Well, that's a hundred thousand people. And so I look at these numbers and I'm thinking the corporate side is five x the size of my business, the leisure side is maybe 10 x the size of my business. I've got lots of opportunity to, weave this together with Delta in a way that is, understandable and compelling to those customers.

Jim: 12:52

And we'll talk more about the Delta Wheels Up, integrated experience, but there will be a day potentially when somebody's on the Delta app and you would've have talked a little bit about that being an integrated experience.

George: 13:07

Yeah, I mean, if you go back to the whole sort of central notion that we're really trying to drive our strategy around its customer centricity, and it's really giving the customers the widest array of accessible, seamless, integrated choices on how they travel. Not for every trip, but trip by trip, which is how people want to choose how they travel, and the more, the broader, we can make that ribbon, Jim, from obviously, you know, turboprop aircraft to, Delta A350s to every private aviation aircraft in the world available to us through charter. Also, you're commenting on something that applies to the Uber partnership that Delta recently announced, the Joby partnership. You know, you start weaving this together and then you start thinking about an end state where. It's all tech enabled, right? Where if you are one of those customers who has been identified as a joint customer or a joint customer prospect of both companies, you'll go on the app, whether it's the Delta app or the Wheels Up app, and you'll type in two city pairs. By the way, in the real end state, when you start thinking about Uber and Lyft, maybe you're typing in two addresses, not airports, but let's stick with airports for now. You type in, I'll pick two names, Pittsburgh to do Dubrovnik Well, you know, Delta doesn't fly nonstop or at all to do Dubrovnik. You could imagine two or three options pop up on your app. Option one is a purely commercial option. You know, Pittsburgh, J-F-K-J-F-K, somewhere in Europe, Paris or KLM and then, or, or Amsterdam. And then you take a connecting flight into Dubrovnik on one of their, Delta's partners. or maybe you get a second option, which says, first leg Pittsburgh to JFK on Wheels Up down a set of stairs into a car. Onto the plane and then Delta, and maybe the last mile is also on us. But you start to start, think about permutations. Purely commercial, purely private, optimized hybrids. And, the data begins to build on the choices you're making and how you make that cost benefit analysis so that you're shown more informed choices. Not for everyone, for you based on your patterns as this evolves, but integrating that tech where we're really delivering it seamlessly. And customers are just selecting. And you might select one thing one week and with the exact same set of choices, you know, a month later select something different because every trip's different and your emotive state as a customer is different for each purchase. And we're really trying to dive down into that level.

Jim: 15:33

George, I look forward to talking more about that integrated, solution, If you could for our listeners, talk a little bit about the private aviation industry, from charter to member programs, to fractional ownership, to full ownership. Just give our perspective on its size, its makeup.

George: 15:51

Sure. Yeah. so I, I'd start with sort of at the top level, how are all the private aviation aircraft in the world, owned or accessed? So the vast majority of private aviation aircraft, that exist in the world are still wholly owned, wholly owned by corporations and individuals. if you look at it by, number of aircraft or tails. You know, I, I'll give you an approximate number, but it's somewhere in the two thirds to 70% range. If you look at it on hours, it's a bit less because those aircraft don't fly as much as aircraft that are fractionally owned or, run by operators, which by the way, tells you that maybe that's not the optimal way to own those aircraft, because they're not being fully utilized. So the vast majority are in, in that environment. When you look at, the subset that is not wholly owned, as I was mentioning earlier, the biggest model, the dominant model in many respects is the fractional model. And so, you know, we estimate that about two thirds of the aircraft that are not wholly owned are fractionally owned, and then the remainder is in on demand. And on demand can, can consist of two different, versions and permutations within that. It can be kind of programmatic membership, like our membership, or it can be purely ad hoc charter, and that's all kind lumped in as on demand, not fractionalized, not wholly owned. So you kind of ask yourself, is owning your own airplane and your own pilots, your own maintenance, your own hanger, your own insurance, your, I mean, it's a lot to manage, right? it's a lot of fixed cost optimal. or is fractional, which is basically a timeshare model, right? It's the transaction, just in case your listeners aren't familiar with it, is basically you, you procure a fraction of a particular aircraft type. and that fraction gives you a certain number of hours per year on that aircraft type. So let, let's pick an example. you know, a Challenger 300 or a Phenom 300, you're gonna pay for the fraction of that new aircraft that you purchased, you're likely never gonna fly on that actual aircraft. You're now gonna fly on a fleet of those aircraft types. So you kind of buy a new aircraft and then you fly on the average aircraft in the fleet, which might be seven or eight years old. So ironically, you're kind of paying for a new and getting, lightly used. and then you are entitled to fly a set number of hours per year on that airplane, a hundred hours a year, let's say, for five years. That plane depreciates, you pay management, agreement payments, a variable cost, and then the plane is worth whatever it's worth at the end of that. And obviously the difference is incurred by you as the fractional owner of that airplane. Let's take a hypothetical customer. So you're a person who lives in New York and you have a house in the summer, in Martha's Vineyard, and you have a house in Aspen in the winter and for parts of the summer. So. You're gonna be told you need a big airplane to get yourself to Aspen. So you're getting a Challenger 300, 3 50,'cause that's the range you need to get you to Aspen. But then you're flying this airplane 80 miles to Martha's Vineyard every, summer, every weekend or whatever. And, you know, not optimal. Now, if you had the choice of one airplane type for a, for Martha's Vineyard and a different one for Aspen, you'd theoretically be better off if you weren't sure if you were gonna fly exactly a hundred hours a year. And some years it might be 50, and some years it might be 200 and some years it might be zero that's hard to manage. So you ask yourself, well, why would people kind of sign up to this? And I think the answer is that until now, and this is really the space we're trying to move into, until now, there hasn't been a comparable alternative that is as good as these leaders in our industry who, who primarily focused their strategy around, around fractional ownership. And that was really the crux of our decision to renew our entire fleet. And last October, as you know, we announced that we were replacing every jet in our fleet, with new jet fleet types to us, which are the core of these fractional programs and the go-to aircraft for corporate customers and the most discerning leisure customers, those being the Phenom 300 and the Challenger 300, 350 platforms. And so that gives you a little bit of a sense for what's happening, if you step back and say, how's it likely to evolve over time? I think that as there are more choices in private aviation, you will see some of those 90% of people, Jim, who can afford to, but never have entering the markets. That's gonna be good for the market as a whole. I think that you'll see wholly owned aircraft, as a percentage of the total decline over time, as other alternatives that are more flexible and less expensive become more, I'd say fully accepted as the primary way to fly private. And then I think within the operator world, we expect to see, tailwinds as we try to articulate to customers the benefits of the more flexible, accessible, less costly model of, with the same level of quality and service, private aviation that we're offering versus the, I'd say more rigid, models of the fractional, providers. And so I think those are some of the trends you're gonna see. I also think in a market like the one we're in, where there's more macroeconomic and market uncertainty, concern, you know, our kind of easier way to access it, we could see some benefit as people think about that more advantageously relative to longer term commitments, more capital intensive commitments of some of the other segments of the market?

Luka: 21:14

George, along that spectrum of full ownership, fractional ownership, all the way down to On-Demand Charter or even marketplaces, what are some of the companies that stand out as biggest success stories, either financially or otherwise?

George: 21:26

Well, look, the industry is largely private, so it's hard to have trans other than us. but it, it's hard to have transparency on, you know, financially how folks are doing. But look, I think, we, we have to obviously acknowledge that, NetJets, which was a pioneer in this industry and is the largest operator in this industry, does an exceptional job for their customers. And, and they have a very loyal following, particularly among, I'd say, corporate, aviation buyers. Everybody's got a slightly different model. I think Flexjet has a model that's very similar to NetJets in many respects. VistaJet, has a model really focused on long range flying large aircraft. You know, their smallest aircraft in their fleet is sort of a super mid aircraft all the way up to long range trans, oceanic aircraft. They have more of a membership programmatic model similar to ours, but I'd say at a different point in the spectrum of aviation solutions, we hit those long range segments of the market with an on-demand ad hoc charter capability with our half of our business, as I mentioned, is Global Charter as opposed to owning those assets today. But you know, they all do a great job. I do think there's a pretty significant step down once you get past the big four, which are the three I mentioned plus us. And look, I think we're filling a space that seems to be, you know, vacant at the moment and we're moving from, if you think about the, the heritage of Wheels Up and the origins of Wheels Up, a domestic membership centric, king air centric kind of entry point into private aviation. And between the combination of our, acquisition and growth of a tremendous global charter business and air partner, which we bought three years ago, that business is now as big as my member business. and gives me the capability to deliver any airplane here in the US or anywhere in the world for my customers. And then you think of course about the Delta partnership and then you think about the fleet announcement where we're, you know, investing a tremendous amount of capital to modernize our fleet, to have the best fleet in the industry. We're really moving from domestic programmatic, turboprop centric to global solutions oriented premium. And that is a shift that, is a real centerpiece of our strategy going forward.

Peter: 23:40

Okay, George, elaborate on that a little bit more for us, and let, let's look at it in terms of those big four, how are they playing alongside each other, and where do you see as the most important areas for strategic differentiation?

George: 23:57

Yeah, so look, I think first of all, this is gonna be a growing industry for a long time. So I think there's, there's opportunities for lots of people to be successful with different approaches and, and different models. I think that, you know, our space, I. Really is gonna be centered around, leveraging, and, and commercializing the Delta partnership, attracting new entrants to aviation, attracting people who value flexibility and accessibility. and, and are sort of, not particularly fond of a ton of rules and restrictions, to, to our model. but look, we're, we're doing something that hasn't been done before, right? There's an education process, there's a messaging, there's a period of time that's required for that to become part of people's thinking. You know, we are an example of how we're trying to evolve, people's thinking around how they travel is a program we're, working on with Delta this summer, where, we selected five focus cities in Europe with Delta, Athens, Rome, Naples, Nice, and Barcelona. And so if you go on delta.com, on the app today, and this is really a step toward that integration I talked about, which will take us some time. If you go on that, on the app today and you buy a Delta one itinerary to one of those five cities, you will get a, notification when you get your purchase confirmation that will say, if. Mr. Barry, if, if Athens isn't your final destination and you're traveling onward and would like to fly private, click here, to be connected into Wheels Up. There are a lot of people flying in Delta one to those five cities this summer. you know, we'll see how many trips we ultimately end up booking, but to me, frankly, that's less important than the thousands and thousands and thousands of people who are now clicking, searching, thinking, and maybe they won't do it this trip, but now they're starting to merge in their own minds and integrate in their own minds, hybrid aviation solutions between Delta and Wheels Up. And they're starting to say to themselves, well, geez, if I'm, if I'm spending.$50,000 on five Delta one tickets to Athens. Maybe I should spend 15,000 or$20,000 more to go private from there to my onward destination. The idea that short haul private aviation costs less than long haul premium commercial aviation is another sort of, I think, concept that customers wouldn't really assume or understand. You start to think about how you travel, you start to think about not just staying in the traditional lanes, right? So, gee, I'm going to Greece, so maybe I should go to Miconos or Santorini, or, you know, kind of where everybody's going. Or if you're going to Spain, you Ibiza, you know, well, no, you can go wherever you want. I mean, draw, put a dot on a map and draw a radius circle around that city, that gateway city, and within an hour for X number of dollars I could take my family to the next undiscovered place. The next, next place, the place that's really hard to get to from my home in the United States. And you start to imagine, you know, we like to say, in our business, your itinerary is only limited by your imagination. Your destination is only limited by your imagination. If there's an airport there and there are thousands and thousands of thousands of airports that are not served by commercial air, you know, we can take you there. you know, we did a, and I, and I really, I think this captures it, you know, We supported a very important charity here in Atlanta focused on pediatric cancer. And we donated a flight, to this cause. And, the flight was auctioned off at the event. And, actually a Delta executive ironically ended up buying the flight, which was nice. And so what did they do with the flight? Well, they, they wanted to take their family to see the Northern Lights, and so they flew our aircraft out of Seattle to a town in the northwest territories of Canada called Yellowknife. And they came back with the most unbelievable pictures of the Northern Lights that I'd ever seen. You start thinking about how you can use this tool to create experiences and what is increasingly an experience driven economy and, and society and, the possibilities around the marketing of this get really exciting and you start being not limited. And look, what I love to, to, you know, sort with the Delta folks, they have a vast global network, but it's finite. Now it's not finite anymore, it's infinite. Their network is infinite for their customers. Who can access this, this capability?

Jim: 28:14

How was the integrated experience that you're envisioning for Europe this summer different than what the Delta Private Jets would've been,

George: 28:23

So Delta Private Jets, the business that Delta owned before it sold it for, cash and stock and in the process became an owner to Wheels Up was a domestic, it was a business that Delta actually acquired, through the acquisition of a company called Comm Air, that had that business. And Delta built it into an ice business. It was a domestic business. It was a solely managed aircraft business. It wasn't a business that Delta thought they could get to scale, as part of Delta, which is why the Wheels Up transaction was so interesting. But there really is no comparison, Jim, because back then, you know all of what we're talking about connecting to flights in Europe. And by the way, we're talking about Europe. This could be anywhere, right? I mean, this could be, you know, Africa, Asia, south America. On a personal note, the, the one vacation I took last year with my family, we went on a safari. My family always wanted to go on a safari. So what did we do? I'm eating my own cooking, right? So we flew, Delta to Johannesburg and then instead of figuring out how to cobble together some commercial flights in southern Africa, Wheels Up Charter got us a Pilates. I said, so I wanted to do two things. I wanted to take my family on Safari, and I wanted to go to the most remote beach where we see the fewest people possible. So, we flew a Pilates PC 12. So Delta A350 50 to a Pilates PC 12 to a beach in Mozambique, to a Safari in Botswana, back to Johannesburg. So this is possible, anywhere really. But that's some of the stuff that we think is out there in the future for us and is gonna really capture the imagination of customers.

Jim: 29:51

That's great. What was your favorite part of the safari?

George: 29:55

You know, when you're sleeping in the middle of the night and you realize you're not at the top of the food chain anymore. There's lots of, lots of memories of that, but it was really an amazing experience for our family.

Jim: 30:04

Oh, that's great. Great example too of the integrated experience. So, let's talk a little bit about Wheels Up. What was the vision 10 years ago with the democratization of, private aviation, to today. What was it and and how has it changed through the years and what is it today the vision for the company.

George: 30:21

So look, I wasn't here 10 years ago, so I have to, describe it to you as I understand it from the outside in Jim, but I think, look, the company, and the, and the folks that built it had I think a really interesting idea around how do we attract some of those 90% of people that we referred to earlier that have never accessed private aviation to be able to access it. And how do they build a brand and a community around that that's exciting and vibrant and youthful? And, and look, they did a tremendous job. I mean, from basically startup, in less than 10 short years, they became the fourth largest operator of private aviation. Built a big brand that's really well known, not only here in the US but also to, to an extent also around the world. And it was very much the focus was growth. And by the way, the broader market environment in those days was for companies to focus on growth. And so, you know, there was a focus on growth that drove the company to a very, significant position in the industry over a relatively short period of time when the Delta Wheels Up transaction happened. I remember I came up to Atlanta to sit down with the team and go through it as a board member in the fall of 2019. And the transaction ultimately happened in I think it was January or February. February of 2020. And look, the intention was, and we recognized it was a young company, recognized that they'd grown really fast, recognized they needed some, probably help to manage that growth operationally. And the intention was to do that. However, this, inconvenient thing called Covid happened a month later. And of course, Delta got focused as it needed to on its own plan and its own future. In the midst of that unprecedented shock in aviation and in the whole world. And when people started flying again, Wheels Up started growing even faster than it was growing before. And the operational complexity of managing that growth became a challenge. Delta came in as Covid was ebbing to help with management of that process. Sent some resources over to Wheels Up, built a plan with Wheels up to consolidate its operations into a single operating center and a single operating certificate. And then as the covid bubble of, and it was a bubble of private aviation, you know, normalized. And by the way, it's normalized to a higher level than existed in 2019 before the bubble. And I think that's because kind of once you try this, you start to realize you probably wanna continue to use this, maybe not at the same level, but at some level. Wheels Up ran into some financial challenges, some liquidity challenges, that, Delta decided to come in and help solve with an investment. And it was an investment process and a discussion. I'll, I'll tell you, Jim, that was very different than the first time around, right? The first time around it was more like, we're gonna collaborate, we're gonna help each other out. Maybe there's some synergies. This time it was an integrated part of the premium commercial strategy going forward. And what had happened at Delta over those three years or so had also moved Delta much further away from its competitive set as the premium commercial airline. And their focus on premium had heightened even more. And so this became more relevant just by the passage of time and Delta's own evolution in that intervening period. And so the idea that got me incredibly excited and I think got Delta incredibly excited at starting with Ed is the idea that we would, that Delta would position private aviation as an extension of its integrated commercial offering. This wasn't something that was off to the side. This wasn't something that was separate. It sits above Delta one. It sits alongside Delta one. It's integrated with it. And we, Delta would gain a greater share of wallet with those customers who access both modes of travel, commercial and private and become more relevant to those important customers in the process. And that was what was different. And that is what is different about Wheels Up 2.0. So look, day one in this role, I articulated a couple of really important priorities. And the first one was, we are gonna be the best run private aviation company in the industry and we're gonna leverage and follow the Delta Playbook to do it. You cannot be successful in private aviation if you are not operationally excellent. Safe always, of course. But beyond safe always operationally consistent, reliable, and delivering a premium experience. If you think about what customers are buying, they're spending considerable amount of money to buy back their time, to control, their itinerary, to arrive when they're supposed to arrive, and you have to deliver that. Like when you fail there, everything else doesn't matter. And so we said we're gonna be the best run private aviation company in the industry. I realized day one that even though we still had some work to do operationally, we Wheels Up had gotten a lot better than people realized, and perception was lagging reality. So we made the decision to share every quarter our operating statistics, completion rate on time, et cetera, brand days, which is a new concept we came up with that I'll come back to in a second. And, you know, we don't have an obligation to do that in private aviation. The DOT does require commercial airlines to do that. But we chose to do it because I realized that the facts were gonna be better than the perception. And I wanted to hold us also to account publicly for delivering improvements there and the concept of continuous improvement. So day one, we said we're gonna be the best run private aviation company in the industry. We moved the headquarters from the New York, I'll call it sales centric office, to the operations center that we had opened a few months earlier here in Atlanta, just up the road from Delta. We operate the entire company now out of, the member operations center here, which is a 40,000 plus square foot, facility. Basically a replica of the Delta OCC and run by the same individual that ran the Delta OCC, for 10 years. my Chief Operating Officer, Dave Holtz, we consolidated, It was up to seven or eight, I think it was, maybe eight operating certificates into one operating certificate, which is the equivalent of basically running eight airlines inside the airline, and disparate operating centers around the country. So we moved it all to Atlanta and we started to really drive this idea that operational performance and getting a little bit better every day, an inch better, is how we're gonna run this company. And that is contagious.'cause once that starts, that's a flywheel that actually starts to work in your favor as opposed to working against you every day. I remember, in my early days on the Delta board, in the early 2000 tens, if you had said to somebody, Hey, do you think we could ever have a day when we had no cancellations? You know, you, you'd hear the 50 reasons why that was, like statistically impossible, right. You know, weather, air traffic, planes breaking, you know, pilots getting sick and what have you. Right. Mis connects well. Then it happened, and then it happened twice. And at one point, I think Delta was up to like 250 days, what they called brand days per year. Well I said the same thing to our team here. Hey, hey, could we have a day with no cancels? All the reasons it wouldn't work, right? By the way, this is a very complex business, a lot smaller than Delta, but you know, we have a floating fleet. We don't have a hub and spoke system. We don't have bases. It's not easy. But then we when we had a brand day and then we had another one. And so, last year I think we had just under 90 days with no cancellations. And we measure it and we drive it and we want one or two more every week, every quarter. And we keep moving that number up. And that mindset, I'd say didn't really exist here before. and that was really important.

Luka: 38:02

George, I'm glad you brought up Covid because I've always wondered about this. I understand that you weren't with Wheels Up at the time, but when people in private aviation observed wealthy travelers really adopting private as Covid was ramping up, was the expectation at the time that this is a temporary spike in adoption, or was the expectation that there's no going back once premium customers are exposed to this spectrum of private aviation options. And there was still a spectrum of options, even then. So what was the expectation and then why has there been a subsequent normalization back to not quite the levels of 2018 and 2019, but still some people pulled back out of private aviation and back into commercial. What was the reason for it?

George: 38:49

Yeah, I think, the expectation at the time was that private aviation was gonna see a big spike in demand. And so as you think about it also, obviously the commercial aviation industry is much, much larger than the private aviation industry. So you only needed a small amount of commercial aviation to move to private to see a huge spike in that smaller industry base. Right. But I think the expectation was, certainly, my expectation was that you would see a period of, a dramatic increase in demand, which is what we saw. But then you would see a normalization as, the laws of economics, kind of apply where people who, were marginal private aviation customers or felt comfortable flying commercial, but not during a pandemic, you know, went back to their prior patterns, but not at the same level. And so I do think, we've seen a meaningful move up from, today versus 2019, which I think is secular. And then of course you had the cyclical pandemic driven spike. But I do think the pandemic did, I think, change the baseline for the industry. And I think the narratives that we're now talking about on the back of, of that dynamic, are gonna continue to move that baseline up over time.

Luka: 40:00

Right. And you would expect that with the influx of customers into private, you would create this virtual cycle where you have a lot greater density in your private network. That would drive utilization, that would drive better economics, ultimately better economics and and experience for the customer. And if that's the case, you would expect that the customer would be even more satisfied and stay in private. What ultimately happened to take them back out to commercial?

George: 40:28

Well, I think, look, the vast, vast majority of of customers, who are private aviation flyers, fly commercial also, so the vast majority of private aviation customers are customers of both segments. And what I think what you saw was a shift back, but not a, a complete shift back the, the mix shift changed, but it didn't go back to, to where, to where it was. I think your question around, density and utilization is really the core of, of what's important to build a sustainable and resilient, business in this industry. And, there's a lot of aviation and mobility is a very exciting industry, but you really have to set it up for success. And the details matter. The most important factors that drive performance are asset utilization. And what drives asset utilization is density and network efficiency, right? That's why all the commercial carriers have gone to this hub and spoke, system because that's how you maximize utility and that's how you maximize, traffic flows and density. Wheels Up prior to Covid and then through Covid, you know, got a little bit ahead of itself in trying to offer nationwide coverage with every aircraft type in the fleet. And, you know, we started to address that by acknowledging and recognizing that our density in the east coast and in the west coast and across to boat, traveling between is quite high. But that in the middle of the country, you know, we had pockets where we didn't have the density to offer a guaranteed programmatic, service. Now that doesn't mean we can't offer service, we can offer it, but we can't offer it on a guaranteed basis. And, you know, and so, that was an important step. If you look at what we did last year, basically revenues were relatively flat through the year. We did grow for the first time in two years, in the fourth quarter, but on relatively flat revenues, we were able to improve our contribution margins by 18 points. We went from 1% to eight to 19%, in three quarters. how did we do that? Well, we did that by basically flying the same amount of demand on 25% less aircraft by driving utilization up 32%. And so, you know, that's what I think about when I think about why operational excellence matters, right? You need people who know how to drive those KPIs in this industry in order to be successful, and you're aligned with your customers in that regard.'cause the more successful you are, as you pointed out, the lower your costs are, the lower your pricing can be, the more customers you attract. It's a very, very virtuous cycle. This fleet modernization strategy that we announced was a really important part of that conversation as well, because one of the things we realized is that with the legacy fleet we were flying, there was gonna be a limit to the amount of utilization we could get from those aircraft, given their, you know, operating, characteristics, their reliability levels, the amount of maintenance they required versus the aircraft we brought in. So what we've done basically is taken our business from 1% contribution margin to 19%. I'd say just running the existing legacy fleet we had better. And the next step change in that is going to be, these new aircraft that we're bringing in, which are gonna have very different, utilization numbers based on much higher availability. And what's interesting economically about that model is if you get a little bit higher yield. You have a little bit lower operating cost, you have higher availability, and you can drive more utilization. the profit per aircraft goes up by multiples, not percentages. And that enables us to, to drive, better pricing for our customers ultimately.'cause our costs are lower. Right?

Luka: 44:12

George, what enabled the higher utilization? Can you speak to that? Because as I understand, this is one of the most elusive aspects of the on-demand air carrier business model. Because of the high cost of the underlying asset and the need to reposition the aircraft and all the empty legs, that unfortunately remains a mirage for many companies, and that's why, there haven't really been successful examples of on-demand carriers and most of them tend to become scheduled at some point, one way or another. So what is it that enabled your higher utilization, and broadly, how do you think about that aspect of the business model?

George: 44:45

So the way we drove higher utilization on our legacy fleet was by focusing on those incredibly important small details that drive performance, right? So our maintenance availability on that legacy fleet got a little bit better. Our scheduling capabilities got a little bit better, our rate of unexpected interruptions, unscheduled maintenance, et cetera, got a little bit better. We designed a, network or a system, if you will, that that could achieve higher utility. This, fleet transition is, is a process under which we are going to, significantly reduce the average age of our aircraft. And we purposely selected two aircraft types in the, Phenom 300 and the Challenger 300, 3 50 that have very high inherent reliability. And you know, there's obviously statistics on all of that that you can rely on. And you know, and we're seeing it already with the operation we're already running with those aircraft. but those are very reliable aircraft. And so if you can take your number of, your, your amount of days out of service for maintenance down, if you could take your number of un unexpected maintenance events down, if you can increase your cycles per, per aircraft before it needs maintenance, and you can do all that, that's what in, that's what drives that equation. And so it came down to aircraft selection, but the aircraft don't run themselves. You then have to figure out how to run this network, and you have to start with a business that's of sufficient scale and density, geographic density that you have the ability to fly it efficiently. We run about two thirds revenue and one third reposition, which is pretty good in this industry. So we don't have long, I mean, we, we manage to, short repo legs or no repo legs. we also utilize where we need to for certain trips, third party lift, right? We're not gonna fly a plane across the country to pick somebody up if one of our partners can pick'em up right there. So we're utilizing all of that capability and technology, some of which is relatively new to this business. We're also thinking about how we can drive more value to customers by offering them better pricing that aligns with what enables us to operate more efficiently. So, for example, not too long ago if you had, were a customer of ours and you called up and said, I'd like to go from, you know, Teterboro to Palm Beach next Wednesday. We'd say, great. Sure, sure. Mr. Barry, what time would you like to leave? Well, I don't know, maybe, 11. well, it turns out most of our customers wanna leave or wanna fly between 10 and 2:00 PM Hard to drive a lot of utilization if your whole fleet's tied up for that four hour window during a much longer day. But if, we were able to offer Mr. Barry an eight o'clock time slot or a three 30 time slot that costs several thousand dollars less, that's a benefit to a customer. Maybe you accept it, maybe you don't. That's up to you. But if that allows us to string two or three trips together instead of one trip on an airplane, you start thinking about how you drive utilization through that system as well. And we didn't even have the tools to do that time of day dynamic pricing. We didn't even have those tools until quite recently. And so that's another leg to the plan that we think is gonna drive quite a bit of value.

Jim: 47:58

George, that's terrific. I'm guessing here with the work that Dave is doing with operational reliability, with the work of the utilization that technology plays a big role. Talk a little bit about the role of technology with this overall integrated experience, improving reliability, improving utilization.

George: 48:15

Yeah, so you're absolutely right. The backbone, that the company fun operates with and under, every day is a tech enabled backbone, right? There's a lot of, there's a lot of technology underpinning our ability to, you know, schedule and operate, a hundred plus flights a day. and then to problem solve when there's issues around ATC or whatever it might be. And so we do have a very important technology backbone that the operation runs under. We're continually investing in that, as I just described in the example I just mentioned. we also have a very important, technology front end with our customers, right? The app, the ability to do things online, and all of that. And that's before you get to forward-looking projects like tech integration with Delta and the rest of it. But yeah, you, you can't run a business like this without a really strong tech backbone and continually investing in it. And so, look, technology is one of the biggest investments we make, around here every year.

Jim: 49:13

If we were to walk into the OCC of Delta and to the Operation Center of Wheels Up, what would be the biggest differences

George: 49:22

Well,

Jim: 49:22

size?

George: 49:23

Yeah, yeah. well, the, the physical footprint would look off awfully similar. And the design of the centers would also be remarkably similar. So you would see, people in different functions working in different sort of sections of the room. Member services, trip support, fleet planning, mission planning, different maintenance, flight ops, pilots. You'd see different sections around the room. And then basically the way we have it set up is as you get toward day of flight, you, these flights move toward what we call the bridge, which sits in the middle of the room. And we have a duty director who runs the flights of the day, those flights that are operating and has sort of to his right and to hi his or her right or left, all the key people to solve issues as in when they come up. And so you'll see a lot of TV screens with a lot of statistics on'em and different tail numbers, and you'll see maps with, with airplanes and you'll see where the storms are and, and, and we're keeping track of everything, in, in, in that room basically. And the physical proximity of all the experts we need to run a clean operation is so important, right? The idea that this is a, an in-person, shoulder to shoulder operation where key experts are managing the operation of those flights and the buildup of preparation for those flights and any problems that emerge, scheduling wise or otherwise from, from certain trips, is really important. And having people physically here is just invaluable. I. And I love, and I love that I sit here'cause I can walk out there any minute, any day. I do walk out there all the time and keep a real pulse on, what's happening. you know, there's been a lot of changes, obviously to the work environment, through Covid and post Covid, but I think we've, we, we have, we're pretty clear minded that we all have to be here to make this operation run. And we're, we're having fun here.

Jim: 51:12

That's great. So you, you articulate a very impressive and, and inspiring vision for Wheels Up. And it's, and it makes a lot of sense, this integrated experience that a lot of the people in advanced air mobility are hoping for an integrated experience with commercial airlines. And some of the commercial airlines have articulated how this could happen. But let's say five years from now, you're screaming success. What's gonna happen that's gonna make it ideal for Wheels Up one was it gonna be some of the 90% who are eligible for private aviation start taking private aviation? You're hoping to be able to hook them through the Delta experience. What else is gonna happen that's gonna enable your success?

George: 51:59

Yeah. So look, I think five years from now for us, what success looks like is we are a participant in a bigger industry that we helped expand through some of this thinking. And, some of the, the offerings that, that we've talked about, I think, in five years success would mean that people who fly private, who access private aviation, whether it's occasionally or frequently, think about the industry differently. They think about it as a tool in an aviation travel toolkit that they can apply as they see fit, trip by trip. Whether that's, again, a lot or a little, whether they're a big customer or a small customer or a corporation or an individual where they live in the United States or they live somewhere else in the world. Seeing this idea of a solutions based approach spanning across private and commercial come into, I'd say realization Jim would be a really important part of what a future success would look like and will be the beneficiaries of that along with others, but will be a beneficiary of that. I would wanna see, customers really having the broadest array of tools and an expanding and expanded array of tools, in their hands, to decide how to engage with us. Right. So you mentioned air mobility, you know, you can imagine knitting together more pieces to the ribbon. Right? You can imagine a, a ground transportation element. An urban air mobility element, an eVTOL element, you know, a long range aircraft element, you know, you can imagine continuing to tighten the seams between these things. Right? So how do you tighten the seams between when you walk out your front door to when you get on the eVTOL to when you get to the airport, to, how, how does that experience of I. It's the seams that matter. You know, in a lot of ways you can have all these really cool offerings, but if you can't stitch'em together, you start to really lose the value of them. But, what is it gonna feel like for a customer to walk off of a Delta airplane, go down a set of stairs, get in a car, and within 15 minutes they're in another aircraft going to their, what's that gonna feel like when we really have that on autopilot, so to speak, you know, when people can choose, right? You know what, I'm gonna splurge for this next trip, but I don't need to for the wine. When they can start to get the power of choice, in their thinking, I think we're gonna build a lot of loyalty and brand value. So I think that's what, I think that's what success is gonna look like.

Jim: 54:24

George, let's say Robert Isom and, and Scott Kirby are listening, to the conversation and, there's some vision there. What would they say to this clearly different approach that Delta's taking, to the incorporation of private aviation? What would they like about it and what would they not like about it?

George: 54:42

Yeah. You know, I'm not sure I'm in a great position to answer that, Jim, but I would say, I think Delta's in a different position in its own industry than some, some of the folks you mentioned. I think when you look at, on the commercial airline space, the company that has really, redefined premium commercial. If among US carriers, I think you'd have to point to Delta. When you look at companies that have been the most, not only commercially but financially successful, you'd have to point to Delta. But then very importantly, you know, Delta has executed over the last 10 or 12 years, a really important partnership strategy around the world that is quite differentiated from other carriers. So when you look at what they've done through their, integrated joint venture with Virgin Atlantic, with a France KLM, with Aero Mexico, with latam, with Korean, you know, these are, these partnerships, with a capital"P" I would say are unique to Delta. And so, look, I don't think there are a lot of other companies, like Wheels Up that, other carriers could attach to. But at the same time, on the commercial side, Delta has a different DNA around partnerships. This idea that, you know, we really invest in partnerships for the long term. We don't kind of keep track of balls and strikes every week, month, quarter. And we ultimately all benefit from the long-term collective success we build is, is easy to say, but it doesn't happen that often. And I had the benefit of, not only seeing it being part of it, participating in it as a Delta board member for 11 years and look the culture of the, of what's inside our partnership, I would say is gonna be the ideas are, interesting, hopefully, and compelling and, have a lot of potential. But to realize that potential, you have to have, the right set of aligned partners with the right cultural mindset to produce it.

Jim: 56:28

Great George. Talk a little bit about what it's like to be the CEO of an organization. What's a day in the life of George Mattson look like?

George: 56:36

Yeah. well, I knew I was signing on for a full-time 24 7 job, at the beginning, Jim, but, certainly, I might have underestimated that, I had the good fortune to spend quite a bit of time with CEOs of companies in my career, as a banker at Goldman Sachs, and then as a board member on different boards, including Delta. And you always kind of think, you know, kind of what that job's like, but you don't completely know what that job's like. And there, there is an intensity to it. There's a kind of breadth to it that definitely, involves a learning curve, right? And so I think I came into this role feeling pretty well prepared, given my history in aviation, my history as a strategic advisor, a banker, a financier, a board member of Delta. But there definitely was a learning curve. And, and there's an intensity to it that you have to really embrace and kind of be ready for. And if you do, it's quite. Intoxicating. It's quite, it's, it's quite exciting. But, you have to get used to it. This may have been a different sort of setup than a lot of other CEO jobs, but there was a clear plan, but there was a, an immediacy to executing against it. there was a, a need not, I wouldn't say to turn the company around'cause I think that kind of misses the mark, but really to transform the company, on a very accelerated pace. So a lot of, I think what I've been trying to do is sort of set the pace and set the priorities and not make it too complicated. Right? This is a pretty complicated business, but I think you really have to distill it down. And I got this advice early in my career from a mentor that I think has really proven valuable to me. Like you have to know in your mind what the three or four things that you're focused on are. And you have to drive those three or four things, and there might be four.

Jim: 58:16

three or four things, George, for you?

George: 58:18

Well look for me, I mean I think I've already talked about a lot of them. For me it was repositioning the company around operational excellence. It was building on our already strong team to have a truly exceptional team. on that point, I would say one of the things I've learned in my year and a half here as CEO is you spend an enormous amount of time and is incredibly important and valuable time, around people and team. And you cannot have the best company if you don't have the best team. And then your job is basically to figure out how to align that team to work together seamlessly as a team and to hit their potential as a team. And so, you know, operational excellence. Team resetting the strategy and really resetting the messaging around the strategy. We're not a King Air company, we're not a member company, we're not a domestic company, we're not a product company. We're a solutions company. And so that was, I think, really important. and then in the first year, it was really putting the pieces in place to set the foundation for what we can build in the future. And so we had to set the pieces starting with operation and team, and then the strategy and then the assets, the fleet. And so, you know, we spent a lot of time last year, with our board building a multi-year plan, building a fleet plan that supported that plan, putting the economics behind it that supported that those investments were, were advisable. And so, you know, those are the three or four things that I try to drive and I try not to get overly distracted with, other, other priorities. But there's, you know, every day here is different. but it's an incredibly interesting and exciting industry. I'm, I'm blessed to have great partners, great investors, and great people around me. So it's a team effort. There's no doubt about that.

Jim: 1:00:03

Let's let's say United Air LInes tomorrow announces a relationship with a Wheels Up like organization, do you sit back and say, yes, somebody is, is, you know,

George: 1:00:15

Somebody has validated, somebody has validated our thesis.

Jim: 1:00:18

Yeah. Right. Or is it, oh, no, not not United. Is it likely to happen? And how would you feel?

George: 1:00:25

I don't, I don't, I don't know if it's likely to happen, or not. I, I think, I think it definitely would lend credence to the ideas that we're promulgating and in that sense it would be a good thing. and look, I, I, I feel good about our hand and if, if somebody wants to put forth a similar model, I think we would do okay. We're all pretty competitive around here. I think we would welcome the opportunity to, to shine.

Jim: 1:00:48

George, you were long time on the board of Delta and you've seen some great CEOs, forgive me. I think Richard was there at, during that

George: 1:00:56

Yep. It was Richard and then Ed. That's

Jim: 1:00:58

I mean, come on. Two of the better CEOs you'll see anywhere. What are the things you look at that make a great CEO?

George: 1:01:04

I did have the privilege of working with, with both of those CEOs and learned a tremendous amount along the way. And look, I've known Ed for a quarter century, which must mean I'm getting really old now. But, but, and, and also as I mentioned, just in my career, I, I sat in a lot of boardrooms and met with a lot of CEOs, in different industries. And, you know, you learn different things about, each situation and each person, and you try to take something away from those, interactions that you know you can learn from. Look, a lot is said and written about, about this role and about leadership, but I think, I, I think there's a couple of things that probably are consistent across the board. One, you need to have, a clear sense of where you are and where you're trying to go. You have to have a sharp view on what your strategic focus should be. And I think to use, Delta and Richard and Ed as an example, they chose a path that invested in the idea that airline travel wasn't a commodity. That price wasn't the only thing that mattered, that customers might not even realize it yet, but if given the choice between a premium offering that, required that they pay a little bit more for it. They would take that. And, you know, I remember some of the early days of, of that journey and, you know, branded fares and cabin segmentation and I remember the experiment where, we were gonna, Delta was gonna charge a different price for, a middle seat in the back versus a seat in Delta Comfort. And how many people would take that? And what you, what customers started to realize is the behaviors were, they picked the lowest cost option first. And then, then if something would come up and say, well, for$29, do you want an exit? Or, you know, and everyone's saying yes. And they started realizing they were training themselves to realize that they, so you learn a lot, but you have to have a sharp strategic focus. Delta invested in the idea of a premium experience. Ed would tell you the most important part of that experience is the team that delivers that experience. The frontline team that delivers that experience every day. You know, I was on a Delta flight this morning, coming in here. And, gosh, our flight attendant was awesome. I, I just remember thinking, this is like the greatest flight attendant I've ever had. And so these people exist and these people promulgate the brand. So the first thing I'd say, sharp, strategic focus on where you're going. So I think we have articulated where we're going. Second. you've gotta realize that you've gotta surround yourself with the best possible people, and you've gotta attract those people and you've gotta attract them. Look, everyone wants to do well financially and everything else, but you really ultimately wanna attract them with a shared vision of where you are going and an excitement about being part of that journey and really buying into that because you can't create passion with money and you can't create passion with expanded roles or promotions. People need to believe it. And I think when you have that alignment, of your team, and look here, we have just over 2000 people. Delta has a hundred thousand people, but I, I give Ed and Richard and the Delta team, tremendous credit for having extended that passion for what they do all throughout a hundred thousand people. Imagine that. Third, you know, I would say, and I learned this a while back, and it's a journey I think we all go through in our careers. Early on in your career you're trying to be, competent, smart, convey what your capabilities are. You do a, a lot of talking, maybe a little bit less a listening, you know, I've learned how important listening is. You know, you have to listen. You have to hear, by the way, which is different than listening. You have to hear what's being said, and maybe you have to hear what's not being said. And you have to know which questions to ask and how to ask them. And, maybe you don't want to tell the team where we're going. Maybe you want to hear four or five views on it, even if you already know where you think you want to go, because the process of how you get to decisions is as important as the decisions. But at the same time, you need to provide direction. And so there's this, you know, kind of never ending balance, in how to move, the company and, and the team, in the, the direction you think you should go. And by the way, I use the word think because all you ever do is spend time thinking about it, right? You never, you know, you never, it's never, it's dynamic and you never are a hundred percent locked in to one idea, one approach. And if you're, I think if you're good at this job, you need to be constantly testing your own assumptions, testing other people's assumptions, testing the plan, listening to customers. You know, the other thing I'd say is, I try to spend as much time as possible with customers. and in my operation with people who don't work for me, and'cause you learn a lot talking to a pilot, you learn a lot talking to a salesperson, you learn a lot talking to a, a maintenance tech, you learn a lot talking to a customer. And so, I try to be as outward facing as possible in that regard. And I learn the most about what we need to worry about in those conversations, not in the, you know, buttoned up meetings where, you know, we're all talking, here in the headquarters about a particular topic or a particular, priority.

Luka: 1:06:03

Can I follow up on this real quick, George, on the conversations and the insights that you're receiving from the customers in particular, do you have any insight into how much of this segment of Wealthy flyers fly in commercial, first class or commercial business class as opposed to private? And for those who stay in commercial first or business, why do they stay there? Obviously. They have the wherewithal to fly private as well. And so what kind of value proposition would it take to take them out of commercial and into private? What do they care about? I.

George: 1:06:36

yep. So look, I, I haven't done this, segmentation analysis to give you an answer with precision. But what I would say is that we have some customers who fly exclusively private, but the, the majority of customers fly both commercial and private. And that's not just true of us, that's true of every company in this industry. I was with one of the leaders at one of the other very big, private aviation companies, and I heard the same thing. 70%, you know, of their customers fly both commercial and private. Now, that might mean nine outta 10 commercial flights are private. It might mean one outta 10 flights are private. It might mean five outta 10. You know, it's different for, for every person. But I think the answer is to why, goes back to the fact that, look, this is a very expensive way to travel, notional dollars. This is an expensive way to travel. And if you travel. A lot. every trip may not either be possible to be a private aviation trip, nor need to be a private aviation trip. And so, you know, I think what most customers try to do is optimize their budget, if you wanna call it that for private aviation across those trips that matter the most. Some customers have an unlimited budget wherever they need to travel, they're flying private. Most customers have some kind of a budget, an hour's budget, a dollars budget. I'm willing if I'm by myself to, you know, take this trip commercial, but when I'm traveling with my family and my dogs and my whatever, I'm not, I don't want to connect. Everyone has their own paradigm for how they define the cost benefit analysis. And, you know, and we think that's okay. We like that, that's how it should work. Again, back to sort of these differing models, you know, that is not really how the other models, work. They don't really give the customer that ability to make that choice. and by the way, the choice might be different this year, this month, this week, this trip. People's circumstances change. People, you know, start out flying a little bit of private and then they start flying a lot more private. Some people fly a lot and then something changes and they fly less. Their view of the value of it, you know, the value proposition evolves, what I love about the question or the idea is It's not a one size fits all definition. Each individual human being gets to decide that for themselves. And that's, and we wanna meet them in a place where they, we give them the ability to do that. And if we're the company that gives'em the ability to do that, then I think we're gonna win more customers. All things being equal.

Jim: 1:08:51

Most people are not aware of the risks of many different parts of private aviation depending on who you're flying and where you're flying and the like. And I think that's one of the reasons sometimes you'll see people fly commercial is that there's far less risks on certain flights, distances, airports. I think that is one part of the Wheels Up, that the closer you get to Delta and the operational performance of Delta, and with people like Dave Holtz on the team, you know, leading the, the operations, it, it helps to reduce that risk,

George: 1:09:23

and Lee Mook running our safety committee on my board. Exactly.

Jim: 1:09:26

It helps to reduce the inherent risk of private aviation, I think that could be an exciting part of your future and you guys articulate it well. Alright, you've been the co-head of the global industrials group at, Goldman. You've been on the board with Delta. What, do you see as the future of aviation for our listeners?

George: 1:09:45

look, I think the future of aviation in general is very, very bright. I think that, you know, there are still, many, many, many millions of people around the world who have never been on an airplane before. As the world at large, continues to, build middle classes and, and wealthier classes and you see developing economies, become developed economies, I think you're gonna continue to see a long, multi-decade secular tailwind behind aviation and travel, which really is travel. I think will continue to drive industry growth. When you think about one of the, I think byproducts, which lot's been said about, already of Covid, is this idea of experiences mattering more than products or goods. And I think that's, when you think about some of the trends in, in younger generations, you know, I, I don't see that changing for the foreseeable future. I don't, I think people are, are willing to spend a lot more money on a trip of a lifetime with their friends and family than on a new watch, or a new pair of shoes. and so I think that share of wallet will continue to increase as well, and as technologies enable people to travel longer distances more efficiently, more cost effectively, in a more elevated experience, which is kind of where all of aviation is moving, both private and commercial. It's gonna attract more participants, and a higher and a larger share of wallet. So I think the future is very bright for aviation. I think connecting the world, is something, and being connected to the world is something people inherently want. and, I think that's what we, are gonna see in the future is, is, continual growth. I mean, ultimately tied, you know, I'd say to the wealth effect, the growing of middle classes around the world, and here in the US and, and accessibility. But, but I think this industry's gonna continue as it has to grow at a higher rate than GDP.

Jim: 1:11:55

George, a question on advanced term mobility. How did your view of, let's say Joby, like organizations, how has it changed over the last five or six years and how has it changed with your running Wheels Up?

George: 1:12:11

Yeah, I think, look, I think there's a really important place for short distance, urban air mobility in the ecosystem. There are companies today, you know, I, well, you didn't mention this as part of my background, but one of the, businesses I invested in shortly after leaving Goldman Sachs, was a, a company called Tropic Ocean Airways, which flies amphibious sea planes, wheeled and amphibious. So mostly amphibious sea planes, in Florida and to The Bahamas. In The Bahamas, and then in the northeast in particular from New York City, east River to the Hamptons in the summer. And so, you know, you think about, urban air mobility, whether it's helicopters or seaplanes or eVTOLs, you know, these cities, around this country have been, you know, are now megalopolis, right? They're impossible to get around. Mean from one end of LA to the other end of LA it could take you half a day, right? And so. And so this idea of short distance, I think has a real place in future, whether the technology, I mean when I should say the eVTOL technology is commercialized, I think you'll see, a, a step change growth in that. But you, you think about, you know, cities and the surrounding areas, and how do we make 40 mile, 50 mile, 60, 80 mile trips possible, which could take, hours and hours in a car, and there's really no commercial service available today, obviously. I, I think it gets exciting and I think those are gonna be, opportunities for companies to take advantage of going forward. And I think that there's gonna be opportunities as Delta is already doing through its partnership with Joby to connect those customers to commercial aviation and to private aviation, in the future, right? I mean, we have, thousands of flights a year that leave from the New York City area and people are spending a lot of money to get on those flights and to get to the airplane at the airport. You know, they're getting in a, in a car and spending a couple hours, get, trying to get across the GW Bridge or whatever. You know, this, there's gonna be better ways to do that going forward. There already are, but it's gonna get more and more, I'd say available.

Jim: 1:14:16

Are the changes in the economy and the introduction of the tariffs recently, is it helping, hurting or are you unfazed by it at Wheels Up?

George: 1:14:25

Well, I would say, macroeconomic and market uncertainty is certainly not helping. But we, sit in a sort of place in the value chain and in the, Customer segmentation chain. That is, I'd say, somewhat resilient to, macroeconomic and market shocks. Certainly, I think what the commercial airlines have seen in terms of, headwinds over the last couple of months, we have not seen, we do have, you know, board at the same time we're not immune to it. So, I think we're resilient to, modest, shocks to the system deterioration, but more pronounced shocks or shocks that last a period of time, history would tell you that, this industry definitely, sees the impact of that as well. We're not seeing that at the moment, but but we're watching it obviously.

Jim: 1:15:09

All right. I'm gonna ask Luka and Peter a question. how has your perception of Wheels up changed based on our conversation with George?

Peter: 1:15:18

I guess my perception has changed in that the Wheels Up strategy is based on expanding the set of users of private aviation and, sort of slingshotting off of the collaboration with Delta on this. But as you move into trying to attract that new set of users, it's pretty complicated to sort of sort through and parse through those customers of Delta who are sitting in first class, their reasons for doing so, and the particulars of the value proposition that you can use to get them engaged with flying private, because it might be a really different value prop than the people that are already using these types of private charter services. And so where do you find the data? How do you look at the available data to understand behavior, to pitch these people in the right way at the right time? That's an interesting question.

Jim: 1:16:16

I'm inspired by your vision. George, I think I read everything I could have read about you, about Wheels Up, about Delta's relationship. I think you've articulated a very compelling vision. I know the hard stuff is, getting revenues up and getting your contribution margin up and getting to profitability faster, but I'm inspired by it. And I would assume the CEOs of the advanced air mobility companies listening would say, go, Wheels Up, be successful. Your success means their success in some ways. Right. That integrated experience is very important to them as well. Alright, so is there anything else that we haven't asked you, George, that you were dying to say?

George: 1:16:55

I, I think you've asked me all the right questions and, this is usually not the case, but I can't think of anything else I would wanna add at the moment, but I probably will think of something when I hang up, so,

Jim: 1:17:04

George, real honored to have you on. Thanks for joining us. Great conversation.

George: 1:17:08

Appreciate it. Thank you guys very much.