Virgin America Sets IPO Terms

By Chris Lange Published Nov 3, 10:50AM EST

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Virgin America Inc. filed its amended S-1 form with the U.S. Securities and Exchange Commission (SEC) for an initial public offering (IPO), and the filing effectively sets the terms. The proposed maximum offering price per share was $24, from a range of $21 to $24 per share, and more than 15 million shares were to be registered, making the maximum public offering over $368 million. The company will list on the Nasdaq Global Select Market under the symbol VA.

The underwriters for this offering are Barclays, Deutsche Bank, Bank of America Merrill Lynch, Cowen, Imperial Capital, LOYAL3 Securities, Goldman Sachs and Raymond James.

Virgin America is Sir Richard Branson’s U.S. domiciled airline, based in California, that provides scheduled air travel in the continental United States and Mexico. Los Angeles and San Francisco act as its focus cities to other major business and leisure destinations in North America. At the end of September 2014, Virgin provided service to 21 airports in the United States and Mexico with a fleet of 53 narrow-body aircraft. This fleet is also one of the youngest among U.S. airlines, comprised entirely of fuel-efficient Airbus A320-family aircraft.

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The company offers premium amenities available fleetwide, including power outlets adjacent to every seat, inflight wireless Internet access, distinctive on-board mood lighting, leather seats and its Red inflight entertainment system. Virgin has won numerous awards for its product, including Best Domestic Airline in Travel + Leisure magazine’s World’s Best Awards and Best Domestic Airline in Condé Nast Traveler’s Readers’ Choice Awards for the past seven consecutive years, as well as Best U.S. Business/First Class Airline in Condé Nast Traveler’s Business Travel Poll for the past six consecutive years.

Virgin offers loyalty programs with tiered benefits for guests, lounge access in certain airports, including the Virgin America Loft at Los Angeles International Airport (LAX), interline and codeshare partnerships with other airlines and a wide range of distribution channels and contractual travel discounts for over 250 major corporate customers and travel agents.

The business model relies on attracting guests who value the premium products, but because of the premium it generally requires a longer time to reach profitability in each new market.

For 2013, Virgin posted operating revenues of $1.4 billion and operating income of $80.9 million with net income of $10.1 million. In 2013 the company increased revenue per available seat mile by 9.3% compared to 2012, the largest increase of any major U.S. airline. There was a recapitalization of a majority of the operating lease and debt obligations in May 2013, which contributed to a $34.7 million decline in aircraft rent expense and a $44.8 million decline in interest expense in 2013 compared to 2012. As a result, financial performance improved to net income of $10.1 million in 2013 from a net loss of $145.4 million in 2012. In the first nine months of 2014, the company had net income of $56.2 million, compared to a net loss of $4.0 million in the first nine months of 2013.

FULL AMENDED IPO FILING

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About the Author Chris Lange →

Chris Lange is a writer for 24/7 Wall St., based in Houston. He has covered financial markets over the past decade with an emphasis on healthcare, tech, and IPOs. During this time, he has published thousands of articles with insightful analysis across these complex fields. Currently, Lange's focus is on military and geopolitical topics.

Lange's work has been quoted or mentioned in Forbes, The New York Times, Business Insider, USA Today, MSN, Yahoo, The Verge, Vice, The Intelligencer, Quartz, Nasdaq, The Motley Fool, Fox Business, International Business Times, The Street, Seeking Alpha, Barron’s, Benzinga, and many other major publications.

A graduate of Southwestern University in Georgetown, Texas, Lange majored in business with a particular focus on investments. He has previous experience in the banking industry and startups.