Virgin America soars in market debut, shares rise nearly 30 per cent

Virgin America president and CEO David Cush (centre) and Nasdaq CEO Robert Greifeld (right) ring the opening bell in celebration of the company's initial public offering on Nov 14, 2014 in New York City. -- PHOTO: AFP
Virgin America president and CEO David Cush (centre) and Nasdaq CEO Robert Greifeld (right) ring the opening bell in celebration of the company's initial public offering on Nov 14, 2014 in New York City. -- PHOTO: AFP

NEW YORK (REUTERS) - Shares of Virgin America, a low-cost airline partly owned by Richard Branson, soared almost 30 per cent in their market debut, underscoring the buoyant mood in an industry that is emerging from a long spell of turbulence.

US airline stocks hit a 13-year high this week as they gained momentum from lower oil prices and increased travel spending by Americans in an improving economy.

The company's IPO is the first for a US airline since May 2011, when Spirit Airlines went public.

Virgin America's shares rose to a high of US$29.74 on Friday, valuing the company at about US$1.3 billion (S$1.7 billion).

"I think it's a buy-and-hold story," said Josef Schuster, founder of Chicago-based IPO investment firm IPOX Schuster.

At the high, the stock was trading 8.08 times 2013 earnings per share, compared with Southwest Airlines' multiple of 37.43 and JetBlue Airways' 24.43.

Virgin America is the US offshoot of Branson's London-based Virgin Group, which is involved in sectors including airlines, railroads, telecommunications, media and hospitality.

The offering of 13.3 million shares, priced at US$23 each, raised about US$307 million, with the company retaining most of the proceeds.

Branson controls 24.8 per cent of the company, while hedge fund Cyrus Capital Partners is the biggest shareholder with a 32.8 per cent stake.

The airline, popular among travellers as it offers Wi-Fi, comfortable leather seats and mood lighting, has been named the best US domestic airline by Conde Nast Traveller Magazine for the past seven years.

"We're the only airline that started since JetBlue that is still in business," chief executive David Cush said in an investor roadshow ahead of the IPO.

Virgin America took to the skies in 2007 just before the financial crisis, and seven years after JetBlue Airways' first flight.

The company earned US$10.2 million on revenue of US$1.42 billion in 2013, its first ever profitable year.

The airline leases all 53 of its Airbus single-aisle planes, which mostly fly long-haul within the United States and Mexico, with Los Angeles and San Francisco serving as main hubs.

Barclays and Deutsche Bank were the lead underwriters.