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.
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.
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.
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.
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.