Virgin America has stated that it's close to turning a profit and may be ready for an initial public offering (IPO) as early as next year, according to USA Today.
The airline posted an annual loss on Monday, but is aiming for a profit in the second half of the year. They have reworked the debt they owe to Richard Branson's Virgin Group and other lenders. This should improve the company's financial situation and bring them closer to the IPO in either late 2014 or in 2015, according to David Cush, the company CEO.
Share offerings would provide an opportunity for Virgin Group and other shareholders to recoup some of their investments, Cush said. The company is based in Burlingame, California, and is privately held. However, it reports its finances as part of financial disclosure laws required by the U.S. Transportation Department.
In the announcement on Monday, the company reported its 2012 net loss increased 45 percent to $145.4 million. The company has been flying since 2007 but has not yet made an annual profit.
Virgin America posted a fourth-quarter loss of $25 million, which is an improvement from last year's loss of $30.8 million. In the first quarter of this year, the company lost $46.4 million, again an improvement from the loss of $76 million during the same period last year.
Full-year revenue rose 29 percent to reach $1.33 billion. The company has deferred delivery of new planes until 2015. Stopping growth is a key part of making the airline profitable, according to Cush.
Virgin America is also cutting interest payments. They recently closed a deal that eliminates $290 million in debt, a majority of which is owed to Virgin Group, converting the debt to "conditional equity," said Cush.
U.S. law caps foreign ownership of U.S. airlines at 25 percent. The debt transaction keeps the company from going over that limit and was approved by the Transportation Department. The deal is the result of six months negotiations.
"We were certainly interested in doing it, but ultimately it was the call of the debt holders and the shareholders," Cush said.
It is too soon to know how much of the company might be offered to the public, as there are many factors, such as how well Virgin America is doing financially, how receptive investors are, and how much private shareholders are willing to sell.
"People are going to want to see some profit," Cush said.
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