The Virgin Airlines IPO is getting on the runway. According to a report in the Financial Times, the company has selected Barclays (BCS) and Deutsche Bank (DB) as the lead bankers. All in all, the timing looks good for a deal, especially given the recent strength in the IPO market.
Of course, Virgin America is the brainchild of Richard Branson, the storied billionaire entrepreneur. He likes to focus on boring industries and make them much more interesting for customers. And what better target than the airline industry? Yes, Branson’s reputation should get a lot of investors to show up for the Virgin Airlines IPO roadshow.
The company, which got is start in 2007, has the mission to “make flying good again, with brand new planes, attractive fares, top-notch service, and a host of fun, innovative amenities that are reinventing domestic air travel.” Just some of the cool features include Internet access, leather seats, video touch-screens and even mood lighting. (When I’ve taken a flight on the airline, it seems like I’m walking into a disco!)
Investors in a Virgin Airlines IPO will certainly expect more than pizazz, of course. They will obviously be focused on the financials as well. Even though the airline stocks have had a nice run — Delta Air Lines (DAL) is up 115% in the past year and United Continental (UAL) has climbed 67% in that time — the industry is notorious for getting hit with big-time problems.
One notable risk is the volatility in energy prices, which can wreak havoc on the bottom line. There are also the occasional price wars. And yes, a slowdown in the economy can take a heavy toll — which is a very real risk for the Virgin Airlines IPO.
Despite all this, the financials for Virgin are showing lots of traction leading up to the Virgin Airlines IPO. During the third quarter, the company generated a profit of $33.5 million, up from a loss of $12.6 million in the same period in 2012.
It also looks like Virgin Airlines is poised for growth. According to Reuters, there are plans to nearly double the fleet to close to 100 planes during the next ten years. The company has also been aggressive with snagging new routes, such as a recent deal with New York’s LaGuardia Airport. The proceeds from the Virgin Airlines IPO will definitely be critical for the growth ramp.
The Virgin Airlines IPO is expected to hit the market during the second half of this year.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.