Virgin America Inc. shares soared in their first day of trading Friday as investors flocked to the airline's strategy of combining low-cost fares with hipster cachet.
Priced at $23 each, shares in the Burlingame, Calif.-based airline, backed by celebrity entrepreneur Richard Branson, jumped about 25% to more than $29 on Nasdaq. The stock price values the company at about $1.27 billion.
Trading under the stock symbol VA, Virgin America raised about $305 million from the IPO. The company said it intends to use the cash to push for more market share and new routes, possibly including flights to and from Hawaii.
The airline, with its fleet of 53 planes based out of San Francisco and Los Angeles, says it has room to grow. It now operates in 15 of the nation's 50 largest markets as well as three leisure destinations in Mexico.
In its offering statement filed with the Securities and Exchange Commission, Virgin America said it recently acquired rights to additional space at New York's LaGuardia Airport and Ronald Reagan Washington National Airport, and moved its service in Dallas from Dallas-Fort Worth to Love Field, near downtown Dallas. The airline said the moves will allow it to ramp up service between Dallas and New York and Washington.
The IPO leaves Branson, through his VX Holdings LP vehicle, in control of 24.8% of the company’s shares, while the New York investment firm Cyrus Capital Partners will own 30.1%. The company’s chief executive, C. David Cush, will own 7.7%, according to company filings.
Launched in 2007, the airline has focused on attracting tech workers and entertainment executives who fly from Los Angeles and San Francisco to the East Coast on business. Virgin America has sought to set itself apart with onboard mood lighting, touch-screen entertainment systems and fleet-wide wireless Internet.
Virgin America reported its first profitable year in 2013, with net income of $10.1 million, compared with a loss of $145.4 million in 2012. The improved performance comes at a time when the airline industry is reporting higher profits amid steady demand and falling fuel costs.
Still, Virgin America remains a gnat in an industry dominated by giant players. Its $1.3 billion in 2013 revenue compared with $24 billion posted that year by industry leader American Airlines, which flies to 273 airports worldwide.
Branson's stake in Virgin America is part of his Virgin Group Ltd., the Britain-based conglomerate with interests in transportation, entertainment, telecommunications, financial services, healthcare and more.
The group suffered a major setback when a rocketship at its Virgin Galactic unit, which hopes to market commercial near-space flights, crashed in the Mojave Desert on Oct. 31, killing a pilot.