European startups are wasting no time in positioning themselves for expansion as Virgin Express ponders following Ryanair with a stock listing, while Debonair looks set to tap the markets by August.
The Irish low-cost carrier set the flotation ball rolling in May, offering 54.2 million shares on the Dublin and New York stock exchanges. The airline raised some US$157 million from the flotation, which was 18 times oversubscribed.
The 'significant premium' has been fuelled by US demand, following the success of Southwest Airlines in the US, explains Ryanair UK's chief executive Tim Jeans. 'Americans are very keen to buy into European startups after Southwest - they've got more appetite for something European institutions regard as high-risk,' adds Mike Powell of NatWest Markets.
The response to Ryanair's offering is whetting Virgin Express' appetite for a listing. 'The success of the Ryanair offer has certainly peaked our interest,' confirms chief executive Jonathan Ornstein.
Ornstein stresses that a share listing is just one of 'a number of different alternatives' being examined to raise money for expansion. He confirms, however, that Virgin Express would opt for a dual listing on US and European stock exchanges. The airline is understood to be aiming to raise US$100 million from the listing to fund new aircraft acquisition, build new routes and possibly another hub.
UK startup Debonair also plans to plough funds raised by a public offering into developing another hub, probably Milan/Linate, to add to the four it is building at London/ Luton, Munich, Barcelona and Rome, says a close source.
The low-cost UK carrier is to seek a listing on Easdaq, the pan-European exchange, and a parallel listing on London's Alternative Investment Market, before August. Crédit Lyonnais is currently putting a syndication group together.
Debonair hopes to raise some US$40-50 million from the listing - amounting to a third of its new total capital - primarily from investors in Germany, the UK and Spain. The European listing has a dual purpose: to fund future expansion and to comply with European Union ownership rules. Although 60 per cent of Debonair's ownership is European, the majority of Debonair's capital is in US hands, as convertible loan stock. This loan stock would be converted to equity following the flotation, explains chief executive Franco Mancassola.
The capital raised would be used to help fund the purchase of 10 MD-95s, with five on option, and four BAe146s, and convert Debonair's 'relatively old' existing six BAe146s to European configuration, the source says. Funds would also be used to develop existing and new routes, he adds.
Debonair estimates it will report a pre-tax loss of US$8.5 million in the year to March 1997, but will make a US$2.4 million profit in 1998.
Source: Airline Business
