Virgin America, a US airline known for its mood lighting, fancy cocktails, and extensive in-flight entertainment options—as well its ties to British billionaire Richard Branson—plans to raise $320 million in an initial public offering that potentially would value the company at $1 billion.
Beyond the basic terms of the stock sale (13.3 million shares sold at an expected IPO price ranging between $21 and $24) the company’s regulatory filing with the US Securities and Exchange Commission highlights some important considerations for prospective shareholders—and some juicy tidbits for anyone with even a casual interest in the US airline industry.
For example, while jet fuel costs have been coming down, ticket prices are flying high. Virgin America’s average fare, calculated by dividing total passenger revenue by the total number of passengers, has been steadily increasing year over year.
As of the end of September, the airline’s average fare this year was $204.25, up from $202.49 in the first nine months of 2013.
But the price of fuel is also listed as a risk factor for the airline; it could spike or fluctuate, or availability could be limited, the filing warned.
The filing also noted that the Virgin brand, which is used across other companies and two other airlines (Virgin Atlantic Airways and Virgin Australia Airlines), is not under the control of Virgin America and therefore poses potential risks:
“[A]ny adverse publicity in relation to the Virgin brand name or its principals, particularly Sir Richard Branson who is closely associated with the brand, or in relation to another Virgin-branded company over which we have no control or influence, could have a material adverse effect on our business.”
Case in point, potential shareholders need to take into account the reputational impact of accidents like the Virgin Galactic SpaceShipTwo explosion last week, along with the group’s 55 other companies across entertainment, wine, and travel industries, to name a few.
Also from the regulatory filing, Virgin America plans to upgrade to its inflight entertainment system. By 2015, the monitors will emulate smartphones with a swipe-and-touch capability.