Virgin Blue flying high
AAP
Virgin Blue flying high
December 8, 2003
THE head of Virgin Blue Holdings Ltd's major shareholder said today he was pleased with the debut price of the discount airline on the Australian Stock Exchange (ASX).
Shares in Virgin Blue debuted at $2.40, a 15 cent premium to the $2.25 issue price for shares in its public offering.
The airline, owned by Sir Richard Branson's Virgin Group and Australian transport logistics group Patrick Corp, made its keenly anticipated debut at noon AEDT.
"I'm always happy if it opens above the sale price – it's a little bit above – I think that indicates a pretty successful float and that the underwriters got the thing pretty close," Patrick managing director Chris Corrigan said.
"It looks to be quite a good outcome."
Virgin Blue's initial public offering closed more than ten times oversubscribed and the pricing of shares in the IPO was at the top end of an indicative range of $1.80 to $2.25.
By 1225 AEST, the shares were trading at $2.42, on turnover of more than 38.0 million shares.
Mr Corrigan, whose company will maintain a 45 per cent share in Virgin Blue now that it has listed, said he could foresee no major shake-up of management now the company had listed.
"Our intention at the present time is to stay at 45 per cent and we have declared that we are happy with the existing management group and that continues to be the case," Mr Corrigan said.
"They're the ones that built the airline and we are particularly keen to see them stay on."
He said Patricks had spent somewhere "in the order of $130 million" to maintain its stake in the airline during the float process.
Virgin Blue Patterson Ord Minnett senior client adviser Ric Klusman said Virgin Blue had made a strong stock market debut. "It's much better than most people expected," he said.
"It's been very well managed by the underwriters.
"I guess with Virgin, there's probably a lot of potential growth that Qantas may not have, but when (Qantas's discount carrier) JetStar comes in I think that there might be some problems."
Sir Richard was at the Australian Stock Exchange's headquarters in Sydney to witness Virgin Blue's stock market debut at 1200 AEDT.
"I am just going to ring the bell – it feels really good, we are very positive but you never really know with the market," he said ahead of the listing.
Sir Richard's other business ventures in Australia include a Virgin credit card.
He said today his next project for Australia would be to introduce Virgin Radio.
"We are certainly planning to," Sir Richard said.
"We are trying to get hold of a licence so we can do it so we are working on it at the moment."
Virgin Blue yesterday said despite the massive oversubscription, staff would receive 100 per cent of shares requested.
Virgin Blue email subscribers and valued customers would receive the minimum $5000 of shares and 50 per cent of any shares applied for after that.
The general public would receive the $5000 minimum application and 25 per cent of all extra shares requested.
Sir Richard, who was considering selling down his stake in the carrier to between 29.1 and 25.1 per cent, has opted over the weekend to keep just 25.1 per cent, in response to requests from institutions for greater liquidity in the stock.
This would raise Virgin's capital raising to more than $600 million and help the carrier take on Qantas' low-cost offshoot Jet Star, due to take to the skies in May next year.
Virgin Blue founder Sir Richard Branson, who has agreed to cut his 29.1 per cent stake down to 25.1 per cent due to the high demand for shares, later said he was "delighted" at the stock's debut price. "We'll have to wait until the close of play today but from the way it's going, it's looking good so far," Sir Richard told AAP.
"We've obviously got the float away, with the support from 250 institutions, from our staff and from members of the public.
"It's always nice that after a float the people can see that they've got an immediate paper profit, but the important thing is that in a year or two from now, that we've delivered and continue to deliver.
"So it's the start of a long process but it's a great, great start."
On the subject of Qantas' low cost airline to be launched next May, JetStar, Mr Branson said it was likely to "bastardise" its mainline operation.
"We've jokingly re-named it `OneStar' on the basis that they've said they are going to cram in as many seats as possible," he said.
"In our opinion, they're likely to bastardise Qantas' mainline operation.
"We're not worried about it; I think the chances are that it is just going to cause Qantas a lot of damage."
Sir Richard said it would be a "bizarre situation" should Qantas run JetStar flights in competition with its more expensive mainline operation.
"Personally, I think the whole thing is a device to get around the unions and it's whether they can get away with it that will be the interesting question mark," he said.
Virgin Blue Holdings chief executive Brett Godfrey said this morning that Qantas' mainline operations on the east coast of Australia would last only three to five years in their current form.
Mr Godfrey told reporters there was little doubt Qantas intended to rely on the low-cost JetStar model, which is set to begin in May next year.
"In the next three to five years, you probably won't see the mainline as it is today," Mr Godfrey told journalists.
"I just don't believe people are going to pay $1,000 for a round ticket between Sydney and Melbourne in business class.
"So, I think JetStar is ultimately what Qantas wants to move to but with the transmission of business issues and the illegalities that surround that, they're going to have a tough time."
Mr Godfrey and airline founder Sir Richard Branson both said they believed their low cost model could continue to work in Australia in the future.
AAP
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