After months of speculation, low-cost U.S. airline
Virgin America Inc.
has finally filed a registration with the U.S. Securities and
Exchange Commission (SEC) to launch its Initial Public offering
(IPO). The California-based carrier has timed its IPO well given a
recovering U.S. aviation market.
Virgin America plans to raise $115 million from the IPO.
However, as of now, it remains tight-lipped about the number of
shares to be offered and the price range. Further, the stock
exchange and ticker symbol have also not been mentioned by the
carrier. Although the timing of the IPO is unknown at present, it
generally takes two to three months to get the SEC clearance.
Notably, the filing follows the carrier recording its first
full-year profit in 2013 in March this year. The company, partly
owned by British entrepreneur Richard Branson, has had a torrid
time since its launch in 2007.
Virgin America provides service to 22 different destinations in
the U.S. and Mexico using a young fleet of 53 narrow bodied Airbus
A320 aircraft. The carrier is currently expanding to serve an
increased number of markets from the base cities of Los Angeles and
San Francisco. With a population base of 27 million people,
expansion from these markets will boost its long-term prospects.
The twin slot wins at LaGuardia Airport in New York and Reagan
National Airport near Washington, D.C. in addition to two gates at
Dallas Love Field airport from American Airlines Group Inc. (
) will also strengthen its operations from these markets.
We believe the IPO, when launched, will get a good response from
investors as the U.S. aviation sector is now showing signs of
improvement, having recovered from the impact of a lackluster first
quarter dampened by a severe winter. Most of the legacy airline
companies managed to beat the Zacks Consensus Estimate in the
second quarter of 2014, with only JetBlue Airways Corp. (
) reporting in-line results.
Further, two of the traditional carriers - United Continental
Holdings Inc. (
) and American Airlines - have initiated their respective share
repurchase programs with the latter even declaring a dividend for
the first time since 1980.
However, Virgin America, which had so far been facing price
competition from listed peers like Delta Airlines Inc. (
), will now have to cope with stock price volatility once it gets
listed. Meanwhile, the IPO will ensure that another floating
airline stock adds to the investors' wide choice range within the
sector. If Virgin America can improve further on its previous
year's performance, it can eventually go on to become an attractive
bet in the stock market.
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
JETBLUE AIRWAYS (JBLU): Free Stock Analysis
DELTA AIR LINES (DAL): Free Stock Analysis
UNITED CONT HLD (UAL): Free Stock Analysis
AMER AIRLINES (AAL): Free Stock Analysis Report
To read this article on Zacks.com click here.