Virgin Atlantic slows IPO to focus on US resumption
Virgin Atlantic (VS, London Heathrow) has reined in its plans to go public, a person familiar with the matter told Bloomberg News on September 29, despite reports emerging in early August that it was aiming for a cash-raising Initial Public Offering (IPO) this autumn.
The transatlantic specialist has decided instead to rebuild its core business as the United States eases travel restrictions, and then to make the case to investors in 2022, according to the anonymous source.
The US announced last week that it would ease travel restrictions in November for international visitors who are vaccinated against Covid-19, including those from the United Kingdom and the European Union, a move that is likely to spur demand.
Reports last month claimed that Virgin Atlantic was not in urgent need of new funding, but the source elaborated to Bloomberg that other options to boost cash reserves remain on the table.
Airlines have been cautiously adding capacity across the Atlantic, and delaying a potential IPO – which Virgin Atlantic has so far declined to comment on – could gradually strengthen its position in pricing a share sale. The airline, which ramped up services between the UK and the Caribbean this summer, is now reportedly working on plans to increase its schedules to the US. Asia, however, is not likely to open up to outsiders until at least early 2022.
Virgin Atlantic did not immediately respond to ch-aviation’s request for comment.
Speaking at the Business Travel Association conference in Liverpool last week, the airline’s chief commercial officer, Juha Järvinen, said that Virgin Atlantic expected “a major breakthrough” in leisure travel next year but corporate travel is likely to return more slowly.
“In 2020, roughly 13% of UK GDP went into excess household savings and people can’t wait to spend it. Next year we’ll have 19% more Upper Class seats to the Caribbean. You might think that’s crazy, but it’s not,” he said, as quoted by Travel Weekly.
On the outlook for corporate travel, he said: “We believe SMEs will be first to come back. Big corporates will conserve their budgets and intra-corporate travel will be last. My view is the biggest [shortfall] will be in short hops, one day out and back. Some of it’s not necessary. Hopefully, people would rather invest in one proper trip and do more meetings. The big question is, will conferences come back?”
Järvinen also criticised the UK government for “supporting the sector the least out of European governments. They somehow took the airlines for granted. We lost at least half a year and the UK was left behind. The industry was collectively offering solutions to the government, but they decided to ignore us.”
To help it survive the crisis last year, Virgin Atlantic secured a privately-funded solvent recapitalisation in September 2020 to deliver a refinancing package worth around GBP1.2 billion pounds (USD1.6 billion) to be delivered up until March 2022.