WestJet, Canada's only successful start-up airline, plans to raise capital and broaden its ownership base with an initial public offering (IPO). The Calgary-based carrier has lodged its draft prospectus with securities commissions in each of Canada's provinces and hopes to launch its IPO in the next few months.
WestJet has debated a public offering almost since its first flight in 1996. The airline, launched on private capital from pension funds and individuals, placed its early emphasis on growth via a combination of debt finance and operating leases. As long as its debt burden remained manageable, company officials wanted to avoid issuing more shares that would dilute the original investments. But, as the fleet grew from three Boeing 737s to 12 and management decided to own more of those aircraft, the need for fresh capital became apparent.
Sandy Campbell, WestJet chief financial officer, says the airline reconsidered the question of an IPO last November when it was arranging finance for three more 737s, but it shelved the idea because Canada's stockmarket was unstable. Instead, WestJet signed a C$27 million ($18.5 million) debt facility with Newcourt Capital.
WestJet plans to issue and offer around C$25 million-worth of new shares. This will boost its shareholder equity of C$49 million. It plans to use the IPO proceeds to purchase more aircraft and to construct a maintenance and office facility at Calgary.
WestJet's growth in western Canada, where it serves 11 cities, has come largely at the expense of rival Calgary carrier Canadian Airlines. WestJet's plans for an alliance with Air Canada could worsen Canadian's situation.
Source: Airline Business
