Sky Airline to
Pursue IPO for Continued Growth in Latin America
(Latin America Business). The Chilean
low-cost carrier Sky Airline is nowadays seeking financial options to fit their
investments needs in the near future. For that purpose, top management has
embarked in a non-deal roadshow with local and international investment banks
in Santiago, Rio de Janeiro and New York in order to review different options
to raise new funds in the midst of an ambitious expansion plan of US $1
billion, projected for 2020.
The plan
includes a total fleet renewal that will add 21 brand new Airbus A320neo, with
the delivery of the first 6 units taking place during 2018. They will completely
replace today’s fleet composed by 13 A319-100 and 2 A320-200 by 2020. The US $1
billion fleet investment is payable within the next 20 years, the actual length
of the rental contract of the aircraft, and it’s projected that this move will
bolster in 24% the total seat capacity of the firm.
Up to date,
all investment plans of Sky Airline since 2002 have been self-financed,
nevertheless the massive size of the aforementioned expansion is unprecedented
for the company, thus requiring other ways of raising capital: initial public
offerings (IPOs), emission of bonds or the entry of a new strategic partner to
the airline. “We’re actively searching for growth options. Our flawless and
swift transition from a legacy carrier to a low-cost airline, with sustained success
during the past semester, is our best presentation card when meeting with
potential financial partners. It’s not a matter of if but when”, stated Holger
Paulmann, CEO of Sky Airline.
Fleet
renovation aside, the other large project encompassed in the investment plan is
the creation of hubs in other cities of Latin America, not necessarily
established in capital cities. This would result in the operation of domestic
flights outside Chile. “The new fleet will give us a larger range and seat
capacity, so if a new route makes sense we will explore it, just as we did with
Brazil, with the opening on December 2017 of the Santiago - Rio de Janeiro and
Santiago - Florianopolis routes. Operating domestic flights abroad is a
different story, so one step at a time…”, says Paulmann.
Nowadays, with
an estimated value of US $300 million, a hypothetical 30% initial public
offering would raise US $100 million for Sky. If an IPO would be the chosen
option, delaying its process isn’t a negative in the eyes of Sky’s executives,
mainly because it will result in an economic valuation and consequently the
raised capital for the investment would also increase. “All options are on the
table at this stage. We haven’t partnered with any financial entity yet, so we
will continue determining our financial roadmap during the upcoming months”,
concluded Holger Paulmann.
Sky Airline,
based in Santiago International Airport, transitioned from a legacy airline to
a low-cost carrier on March 2017, and has been globally recognized as one of
the success stories in the industry for its flawless and fast execution of a
complete makeover in its business model.
Latin America
Business- misancosa@gmail.com