Virgin America airline may be looking for a buyer

Mar 23, 2016, 5:56 PM EDT
A Virgin America plane.
(Source: Alex McKnight/flickr)

Sources reported that Virgin America may be looking for a buyer.

Bloomberg reports:

Virgin America Inc., the airline backed by U.K. billionaire Richard Branson, is reaching out to potential buyers about a sale of part or all of the company, people with knowledge of the matter said. The carrier, which flies to destinations throughout the U.S. and Mexico, is working with a financial adviser after receiving takeover interest, the people said, asking not to be identified as the matter is private. No decision has been made, and Virgin America may choose not to pursue a sale, they said. Shares in Virgin America rose 13 percent at the close in New York to $34.72, valuing the company at about $1.5 billion. Rival airline stocks also rose: JetBlue Airways Corp. and Hawaiian Holdings Inc. both reversed losses to close up, while Spirit Airlines Inc. and Alaska Air Group Inc. pared declines. Virgin America, based in Burlingame, California, sold stock in a $353 million initial public offering less than 18 months ago, pricing its shares at $23 apiece, data compiled by Bloomberg show. Carriers including JetBlue and Delta Air Lines Inc. may be interested in owning Virgin America, according to comments by analysts and consultants on Wednesday. Outside of the airline industry, buyout firms and travel companies could also make bids. “A potential buyer, in our view, could be JetBlue, with similar fleet types, overlapping transcontinental services, similar high-quality product offerings and complimentary networks,” Michael Derchin, an analyst at Sterne Agee CRT, said in a report Wednesday.

USA Today notes:

Since launching in 2007, the airline has become known for its mood lighting, sleek cabins and in-flight entertainment, regularly topping industry and consumer surveys. But Virgin America didn't begin to steadily post profits until 2013.  And at least one analyst says that there are many hurdles that would likely prevent another airline from making a bid for the carrier. "While information is limited at this point, we do not believe another airline would be the logical buyer of the company given the current regulatory environment, Virgin's lack of aircraft ownership or dominant slot holdings, among other factors,'' wrote Jamie Baker of J.P. Morgan in an investors note. "While we'll probably know more in coming days, we are confident for now that the wheels of consolidation remain halted. More likely, in our view, is some sort of private equity or travel-related/non-airline entity,'' Despite fierce competition with American Airlines and Southwest in Dallas, Virgin America saw a $190.9 million profit in the fourth quarter of 2015, a significant jump from the $3.9 million reaped during that period the previous year.