The Virgin Australia Holdings Ltd (ASX: VGN) share price has jumped 8% after returning to the ASX with its initial public offering (IPO).
Virgin Australia is the second-largest airline in Australia.
Virgin Australia share price soars
After a long time of considering it, the Virgin Australia business has successfully carried out an initial public offering.
The market is seemingly excited about the business, with investors sending the Virgin Australia share price flying higher. The IPO price was $2.90 and it has jumped in today’s trading.
Virgin Australia’s shareholders were aiming to raise total proceeds of $684 million under the offer by selling 236.2 million existing shares.
At the IPO price of $2.90, the company would have had a market capitalisation of $2.3 billion, so it has risen further from there.
What is the ASX airline share aiming to do?
The company operates a fleet of more than 100 aircraft on 76 routes to 38 destinations across its domestic and short-haul international business.
It also has a suite of international airline partners which provides a ‘capital-light’ long-haul international (LHI) network that allows Virgin Australia customers to fly to over 650 destinations globally.
Its partnership network has recently grown after entering into an alliance with Qatar Airways which Virgin Australia will operate new LHI services between Australia and Doha under a wet lease arrangement (for aircraft, crew, maintenance and insurance services). Qatar Airways also recently bought a 25% share of Virgin Australia.
Virgin Australia’s ambition is to be the most loved airline in Australia, with a “winning team”, that generates strong loyalty from guests and delivers outstanding results, with an unwavering commitment to safety.
What’s going to be different this time?
The airline business pointed to a few things that could help its profitability.
For starters, there’s Velocity, its loyalty program with around 80 commercial partners and approximately 13 million members. The company said Velocity is an important source of revenue as well as a key element in enhancing the customer experience and supporting their loyalty to Virgin Australia’s airline.
Since the COVID-era difficulties, it has reset the business, removed the underperforming parts of the business, such as Tigerair Australia, freight and the dedicated long-haul international business. It has also renewed its focus on the core domestic and short-haul business.
It has also moved to a more modern fleet, primarily of Boeing 737 aircraft, which helps with network flexibility, reduced maintenance and aircraft order costs, as well as more efficient pilot and cabin crew training.
It averaged around 32% of domestic regular passenger traffic capacity market share in the 2024 year.
Final thoughts on the Virgin Australia share price
Time will tell whether this is a good time to invest or not, but the shareholders have chosen when to IPO at a price that works for them. I wouldn’t choose to invest right now – I’d wait for there to be some weakness in the ASX travel share sector.
There are plenty of other ASX growth shares I’d rather buy first.
