An airline IPO comes back to life

March 9, 2021, 3:40 PM UTC

While consumers are still largely shying away from air travel, a budget airline is looking to convince investors that a rebound in the industry is near as vaccine rollouts continue.

Frontier Airlines, a Denver-based budget airline owned by Indigo Partners, filed for an IPO once again Tuesday. It previously filed to go public in 2017 but dropped those efforts last summer amid the worst of the Covid-19 crisis.

Now though—following a cash-burn heavy year—the company says it believes that vaccine rollouts will spur pent-up demand for travel, and that the first wave of travelers will largely prefer domestic over international routes, a trend that would benefit the company whose largest bases are in Denver, Orlando, and Las Vegas.

“We believe we are well positioned to take advantage of the anticipated demand recovery as vaccine distribution continues,” the company’s IPO prospectus read. “More broadly, after being restricted from travel, we believe many customers will take advantage of the opportunity to travel more in the coming years. We also believe new working patterns and the increasing growth of work from home will lead to increasing numbers of employees choosing to live remotely from their office location. We believe this trend will lead to an increased number of shorter leisure trips by Americans.”

By the numbers, the company had a difficult 2020 much like the rest of the industry: Revenue fell 50% to $1.3 billion while it slipped from a profit of $251 million in the year prior to a loss of $225 million. The company burned through an average of $2 million a day that year, according to the prospectus.

Frontier is not alone. Others are also counting on a rebound in travel after a dismal 2020: Sun Country Airlines Holdings, another domestically-focused airline, is looking to raise as much as $209 million in an IPO, per a filing from Monday.

Another budget airline, Spirit Airlines, meanwhile, has signaled that it is preparing for a rebound in travel: The company has announced plans to begin training new pilots this month.

IPO ALERT: It’s a red-hot week for buzzy tech companies. Watch out for the public market debuts of gaming firm Roblox and South Korean e-commerce company Coupang coming later this week. Roblox has opted for a direct listing, a method that currently raises no additional capital, likely scheduled for Wednesday while Coupang is expected to make its debut on Thursday.

Here’s the other major reason to keep watch at a time when every single tech IPO seems set on going vertical during their first day trading: This all comes as tech stocks have been under pressure as vaccines fan hopes of an end to pandemic lockdowns—and investors speculate that it could lead to potentially slower growth for many e-commerce and communications-focused businesses that have soared in the past year. On Monday alone, the tech heavy Nasdaq Composite down 2.4% on Monday. 

That said, investors have seen tech IPOs as a rare way to get into high-growth startups they previously could not access. And as of this morning, the IPO engine was still roaring: Coupang lifted its price range, saying it is now seeking to raise as much as $4.1 billion in a sale of 120 million shares (17% sold by existing shareholders) priced between $32 to $34 apiece. It previously sought to raise as much as $3.6 billion with shares priced between $27 to $30. 

Lucinda Shen
Twitter: @shenlucinda


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