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IPOs among less established airlines are becoming the norm as the likes of Sun Country was the first to set off the route in 2021 as it was the first U.S airline in general to go public in more than 2 years.
U.S-Based Airline IPOs
The carrier's stock went up from $24.00 to $41.08 since its launch on March 17. From the $218 million it raised from its IPO, the airline was able to repay its $46.3 million loan under the CARES Act enabling the airline to focus on greater goals as it is in the black.
Frontier is another airline following the same route as it launched its IPO on April 1 and has risen already from $18.85 to $21.17 since its launch raising $266 million enabling the airline to repay its $300 million debt.
“We took on the equivalent of $1 per passenger in terms of debt but the rest of the industry took on $16 per passenger."
“There's never been more excitement about leisure travel and there has never been a better time," said Barry L. Biffle, CEO of Frontier.
He went more into detail as he said, “We took on the equivalent of $1 per passenger in terms of debt but the rest of the industry took on $16 per passenger.
Just massive debt load differences on how we managed the pandemic versus they did. When you think about the future we’re just better positioned from a cost structure at a time when all this leisure demand is coming in”.
However, the two airlines to catch the spotlight have been both in Norway.
The Norwegian Model
On March 1, The Oslo Stock exchange welcomed Flyr, an airline that never has flown before but as of now is a carrier with the aim of operating domestic flights with Boeing 737-800 aircraft.
“Flyr will be a robust, Norway-based low-cost carrier, with a financially sustainable, efficient and demand driven business model. We will have modern systems for operations designed by industry experts, a fully digital customer journey and a management with extensive airline experience,” said Wikstrom Frislid of the Oslo Børs.
The airline previously was seen all over the news in Norway but only once it made $70 Million USD after its IPO launch did it catch the eye of the greater public as it has never flown before.
“Flyr will be a robust, Norway-based low-cost carrier, with a financially sustainable, efficient and demand driven business model."
Norse Atlantic Airways also is another Norwegian carrier who has never flown before which has caught the eye of the public with the intention of launching cheap long-haul flights from Oslo, London, Paris to New York, Miami and Los Angeles on Boeing 787 aircraft (originally from Norwegian Air Shuttle) launched its IPO on April 12 and made over $170 million from the following.
“We at Norse Atlantic Airways are very excited about being listed on Euronext Growth here in Oslo. It is an important milestone in our pursuit of becoming a leader in the international low-cost, long-haul market. The global economy has been hit hard by the pandemic but a new era is coming.
People will once again travel for business and pleasure. Our announced entry to the market has sparked tremendous interest among aviation professionals in Europe and the U.S. who want to come work for us. We look forward to welcoming new colleagues, customers and investors on board.” said Bjørn Tore Larsen CEO of the carrier.
It’s “The Norwegian Model for startup airlines.” said Hans Jorgen Elnaes, Winair aviation Consultant, which Kambr Media had the opportunity to interview.
“Everyone flies in Norway.”
“People in the street believe that aviation will come back. People aged 18-35 are aggressive in investing, while the cornerstone investors are among the leading financial institutions in Norway. Airlines that take off with as little debt as possible will lead, as the carriers have a solid foundation in Norway with management and have favorable leasing terms” said Elnaes.
Established carriers will not be able to compete with the lean structure of Norwegian startups, which has made possible the successful investing of Flyr. In addition “Both airlines were oversubscribed” at the time of investment displaying the amount of interest in both carriers.
"Airlines that take off with as little debt as possible will lead, as the carriers have a solid foundation in Norway with management and have favorable leasing terms.”
”These airlines have been marketing themselves to be very lean, cost efficient and have the latest technology. They only have leasing commitments. Interest rates on loans right now are 5-9% for mainline carriers, while Wizz Air and Ryanair loans have an interest of 1-2%."
To this day though Flyr's stock price has gone from $0.70 at its launch to $0.65 while Norse’s also has gone from $2.54 to $2.50 demonstrating that it will only rise once both carriers start flights. Flyr is due to start on June 30 between Oslo and Tromsø and Norse starting long-haul flights in the Fall.
Other carriers such as Goair India and Bamboo Airways also plan to follow the IPO route using “The Norwegian Model” to operate in the post-COVID aviation world as they look to disrupt the market and force change.
“That will be the Norwegian model. To have much easier access to aircraft and better conditions brought about by the lessors as Boeing and Airbus will solely focus on producing aircraft.”
