When IndiGo's parent Interglobe Aviation launched its long-awaited initial public offering in late October, in many ways it typified airline listings which have or are poised to come to market.
In keeping with several recent airline IPOs, IndiGo is an Asian carrier operating in the low-cost sector and plans to use the proceeds in part to fund its fleet renewal.
Five of the seven airlines to list in the last 12 months are from Asia and four of the seven operate in the low-cost sector. And to underline the trend, South Korean budget carrier Jeju Air is set for a November listing.
The IPO of IndiGo's parent company closed six times oversubscribed. Figures from India's BSE stock exchange show that 30.1 million were offered for sale, and that the IPO received 185 million bids, with a price band of Rs700-765 per share. It plans to use the majority of this to fund the retirement of outstanding lease liabilities, as well as for aircraft acquisition.
The Indian carrier already operates just shy of 100 aircraft but expects its fleet to reach 154 by March 2018 as it begins taking delivery of the 180 Airbus A320neos dating back to its 2011 order. The carrier placed a follow-up order for 250 A320neos earlier this year.
Reports resurfaced last year of IndiGo's interest in an IPO – it had originally been linked to a possible listing in 2010 – before it went ahead with one last month.
Another airline to list this year, central European low-cost carrier Wizz Air, made its move in February after dropping initial IPO plans in the summer of 2014 citing market volatility. It raised a net £257 million ($400 million) following its IPO.
Spring Airlines became the first privately owned Chinese carrier to list at the start of the year, and was later followed by another, Juneyao.
That low-cost carriers and emerging markets dominate recent market listings is no surprise. Low-cost carriers are predominantly new entrants into established markets, largely driven by private investors, and much of the growth has been in emerging markets, particularly in Asia and Latin America.
As these operations have matured, original investors either look to capitalise on their investment or seek additional capital to fund future expansion – in particular new aircraft.
The challenge is deciding when to make the move. Several carriers appear to have decided that they are in the optimum stage of the financial cycle with markets showing relative strength.
This could be an opportune time for a listing ahead of any interest rate hike in the USA, which the Federal Reserve has hinted could come as early as December. Such a move could temper investors' appetites while they digest the impact of higher borrowing costs on the global economy.
Even airline operating lessors are looking to take advantage of this "window" with BOC Aviation and ICBC Financial Leasing planning a public listing. CIT Aerospace is also rumoured to be looking at such a move as its parent searches for strategic alternatives for the lessor.
No doubt this positive sentiment is backed by Ferrari's recent IPO, which priced at the top of expectations, indicating investors are willing to pay top dollar for a solid brand.
Fiat Chrysler Automobiles priced the shares on 20 October at $52, the top of the range for the offering, raising $893 million.
FORWARD LISTINGS
With Cebu Pacific, Nok Air, Pegasus, Spirit Airlines, Spring Airlines, Virgin America and Volaris all having listed in the current cycle, IndiGo's IPO leaves relatively few low-cost operators not to turn the markets.
Lion Air is now the only one of the 10 biggest low-cost carriers by passenger numbers not to be listed. The Indonesian carrier is, though, eyeing an IPO, potentially for next year. Lion Air boss Rusdi Kirana told Flightglobal earlier this year the Indonesian group was targeting a listing on the national Stock Exchange at the end of 2016 or in early 2017, and to raise $1 billion through the share sale.
In the case of Azul, knocking on the door of the 10 largest low-cost carriers, it has not been for a lack of trying. Having pulled an initial IPO attempt in the summer 2013 citing unfavourable macroeconomic conditions, in December last year it revived the plan with the US Securities and Exchange Commission, and disclosed its intent to list in Brazil. But Brazil's mounting economic woes appeared to have scuppered the move, with an Azul spokesperson indicating that there is no immediate plan to revive the IPO.
Mexican carrier VivaAerobus is another that aborted an IPO attempt. It unveiled plans to list in February 2014 to partially finance an order for 52 Airbus A320s but pulled the IPO citing market volatility at that time. Chief executive Juan Carlos Zuazua tells Flightglobal that an IPO was still a "desirable milestone" for the airline's shareholders and management, but only when the time was right.
"An IPO within the next 24 months might be an option we will evaluate," he says.
One carrier that does look set to list is South Korean low-cost operator Jeju Air. It secured regulatory approval in September for an IPO and is set to list this month. The carrier hopes to raise up to W154 billion ($130 million) from the IPO, with most of the funds set to go towards purchasing new aircraft and engines.
IndiGo's listing has prompted speculation then another Indian carrier, Mumbai-based budget operator GoAir, may too look at an IPO. The airline itself is not commenting on the reports.
Emerging southern European low-cost carrier Volotea also recently reaffirmed that "going public has always been one of our choices" after September reports emerged that chief executive Carlos Munoz was planning to float the airline this year.
The Spanish-registered carrier says it "is permanently seeking the best financing alternatives to keep on growing", adding: "In this sense, to go public has always been one of our choices."
Additional reporting Laura Mueller and Liam Butcher
Source: Cirium Dashboard
