East European budget carrier Wizz Air is planning an initial public offering (IPO), raising the stakes in its battle with SkyEurope for low-cost dominance in the fast-growing region.
DVB Bank, one of Wizz Air's investors, confirms an IPO is being considered. The carrier is reportedly seeking to raise up to £200 million ($400 million) through a London stock exchange listing.
Bertrand Grabowski, member of the board of managing directors at DVB, says this may be an opportune time to consider an IPO: "There is still a lot of liquidity in the market. Stock markets are doing well and the low-cost business model is understood by investors."
The main financial backer behind Budapest-based Wizz is US private equity firm Indigo Partners. DVB has a small minority stake. Grabowski says Wizz Air chief executive Jozsef Varadi has done an excellent job in establishing a competitive cost structure. He estimates Wizz has a cost base of around €3.70 ($5.00) per passenger, not far off Ryanair's €3.40 per passenger, and ahead of rival SkyEurope at around €5.50 per passenger. Wizz Air has followed more closely the Ryanair model of flying to secondary airports than SkyEurope.
An IPO would help fund Wizz Air's order for 32 Airbus A320s. The airline currently has a fleet of nine A320s and will take delivery of four more this year. It is planning to take delivery of 12 aircraft per year through 2012.
Wizz Air began operations in May 2004 and now has five bases in three countries. It carried 3 million passengers in 2006 and expects this to rise to 4.5 million this year.
Meanwhile, another cash call is likely at SkyEurope, according to Edin Karabeg, Vienna-based analyst at investment bank CA-IB. SkyEurope raised €60 million through its own IPO in September 2005. "Despite a current €24.2 million cash position, we believe that the start of operations from Vienna will burn a lot of it," says Karabeg. "A purchase of flight licenses for Russia, which may be available from the bankrupt Slovak Airlines, and potential operations to Russia will consume more cash."
Source: Airline Business
