Virgin America plans IPO as it hovers close to profit
AIRLINE OFFERING TO HELP SHAREHOLDERS RECOUP THEIR INVESTMENTS
Virgin America said it’s close to turning around its financial losses and could be ready for an initial public offering ( IPO) as early as next year. The airline reported another annual loss yesterday, but it’s aiming for a profit in the second half of the year after reworking debt it owes to Sir Richard Branson’s Virgin Group and others. The improved finances should be one step on its way toward a public offering in late 2014 or in 2015, CEO David Cush said in an interview.
A share offering would be a way for Virgin Group and other shareholders to recoup some of their investments, Cush said. Virgin America, based in Burlingame, California, is privately held but reports its finances as part of financial disclosures required by the US Transportation Department.
Net loss surges
Yesterday, the airline said its 2012 net loss jumped 45 per cent to $ 145.4 million ( Dh534.1 million). Virgin America started flying in 2007 but has not turned an annual profit.
It posted a fourth- quarter loss of $ 25 million, an improvement from its loss of $ 30.8 million a year earlier. In the first quarter of this year, it lost $ 46.4 million, an improvement from its $ 76 million loss during the same period last year.
Full- year revenue rose 29 per cent to $ 1.33 billion.
Virgin America has already deferred deliveries of new planes until 2015. Stopping its growth is a key part of making the airline profitable, Cush said.
It’s also cutting interest payments.
Virgin America recently closed a deal that eliminates $ 290 million in debt, a majority of it owed to Virgin Group, Cush said. The debt was converted to “conditional equity,” he said.
The US caps foreign ownership of US airlines at 25 per cent. Cush said the debt transaction keeps its foreign ownership under that threshold and was approved by the Transportation Department. Discussion about reworking the debt began about six months ago, at the same time it was talking about delaying its aircraft deliveries.