Virgin America Looking Forward to its IPO

On November 19, 2014

Virgin AmericaOne of America’s biggest Airliners the Virgin America has decided to go public with a price of $23 for its Initial Public Offering. The Virgin America has been one of the best domestic airline companies according to a general public survey; however the company has also struggled financially in the past with losses greater than $670 Million in its first five years

The Virgin America was founded back in 2004 and started its services in 2007; it is headquartered in California, USA. The recent drop in oil prices have been a good sign for the company resulting in increased sales of $41.6 million in the third quarter. The company gained profits of over $10 Million and revenue of $1.4 Billion.

Virgin America declared 2013 as its first ever profitable year. It is backed by the billionaire British entrepreneur Sir Richard Branson the founder of Virgin Group which owns more than 100 different companies. It has a fleet size of 53 airplanes and flies to 21 destinations. The company goes with the slogan of “making flying good again”. The company provides a number of unique facilities on-board including free wi-fi through a Google Inc subsidiary, which has increased its popularity among the general public.

Since its inception, the company has attracted many customers by providing them great on-board services and advertisement campaigns like BLAH airlines – a six hours long video, which in its first 24 hours was viewed 75,000 times. The company also plans to increase its fleet by adding airbuses to its fleet of 53 jet aircrafts by the end of 2016 and plans to further increase its fleet by 48% between the time period of 2015 and 2022. Despite many great on-board services the airlines has been highly criticized for its safety programs and has been asked to take measure to upgrade its safety protocols. The concerns were raised following the tragic incident of Virgin galactic space ship 2, which crashed in the Mojave Desert killing one pilot and seriously injuring the other.

Virgin America faces strong competition from rivals like Delta and American Airlines which have spent big bucks to upgrade their desirable features. Understanding the seriousness of the competition in the market and strengths of its two big rivals, the Chief Executive Officer of Virgin America, C. David Cush considers it extremely important to launch the upgrade program.

At its first IPO, Virgin America shares will be available with “VA” ticker on NASDAQ on Friday. The Barclay’s and Deutsche Bank are leading the offering followed by Cowen and company, Bank of America and Goldman Sachs.

13 million shares of the airlines were registered while 2 million more as an option were made available. The offer of $23 / share for its 15 million shares takes the total figure up to $352.8 million.

Analysts have given mixed reviews about the level of success the Virgin America will enjoy in the market. Leeham Co.,’s Managing Director Scott Hamilton believes that the airlines will not have any significant share of the market considering the huge losses it suffered in the past. He said that the fact the company has lasted this long is a surprise itself.

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