Virgin America Said To Be Nearing IPO

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Virgin America has recorded its first profits and is apparently eyeing an initial public offering, according to the Financial Times. According to the website’s sources, the airline spoke with about six banks about an IPO last month. They said Virgin appointed Deutsche Bank and Barclays for its offering, which could come in the second half of the year.

Virgin America posts profits

It’s been a decade since billionaire Sir Richard Branson founded Virgin America and seven years since the airline made its first flight. The airline has said it wants to inject style back into U.S. air travel, which some would say has declined in quality over the last ten years or so.

Last year Virgin America reported $1.3 billion in revenue. If the airline does follow through with an IPO, it could raise capital in order to expand beyond the 53 aircraft it currently has to nearly 100 over the next ten yars.

Virgin America looks to expand

The airline runs flights all around the U.S. and is currently planning to ramp up the number of routes it runs. Virgin America has been said to be angling for some of the slots which are opening up at New York’s LaGuardia Airport. The airline is also reportedly considering getting into Reagan National Airport in Washington as well.

Currently Virgin Group owns 49% of the economic interest in Virgin America but controls 25% of the voting rights. If the airline does an IPO, the Virgin and Cyrus Capital Partners, which purchases distressed debt and is the other major shareholder, could sell part of their stakes, including a debt position which would then be able to be converted to equity after the offering. CEO David Cush and Chairman Don Carty also hold equity stakes in Virgin America.

This could be an opportunistic time for Virgin America to have an IPO as airline stocks have rallied, largely due to consolidation. American Airlines Group Inc (NASDAQ:AAL) recently merged with U.S. Airways. If the airline does follow through with an offering, this would be the first by an airline since regional carrier Spirit Airlines held its IPO in May 2011, raising $190 million.

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