The non-deal roadshow for the imminent Virgin Australia (VA, Brisbane International) IPO got underway last week with CEO Jayne Hrdlicka, Chief Development Officer David Marr, and new CFO Race Strauss introducing the airline to Singapore's financial glitterati, which according to Australia's Financial Review outlet, included an explainer on the complexities of the Australian domestic airline market.

The pitch included eight strategic drivers “for further growth and upside” and said Virgin Australia's successful post-administration restructuring focused on right-sizing to focus on its profitable core, optimising operations, and resetting the balance sheet for growth. Virgin Australia's owners, Boston-based Bain Capital, are eyeing an IPO as soon a mid-2Q 2023 if conditions remain favourable and fallout from the Credit Suisse collapse doesn't scare off potential buyers.

Leaked pitch documents reveal Virgin Australia's gross debt stood at AUD1.97 billion Australian dollars (USD1.31 billion dollars) at the end of December 2022, down from AUD5.15 billion (USD3.43 billion) in mid-2020. Underlying earnings before interest and tax were 11% for 2H 2022 compared to 3% in the comparable 2019 period. The documents further noted that Virgin Australia's minimalist short-haul international network is now "financially accretive," and that the fly-in-fly-out (FIFO) charter arm, Virgin Australia Regional (VA, Perth International), is profitable and doing well.

There are several potential benefits to Virgin Australia conducting an IPO. One of the main advantages is that it would allow the carrier to raise additional capital, which could be used to fund expansion plans, pay down debt, or invest in new technology. Another benefit of an IPO is that it would allow Bain Capital to sell some of its shares in the carrier and realize a return on its investment. The private equity group, which acquired Virgin Australia in 3Q 2020, has reportedly put a circa AUD3 billion (USD2 billion) equity value on the airline but may retain a larger stake than initially planned to ease potential buyer's jitters.

In addition to the market upset caused by the Credit Suisse collapse, high inflation and interest rates, an in-depth understanding of the Virgin Australia playbook and the local airline market may make the IPO a tougher sell with Australian institutional buyers than previously anticipated. In Australian corporate circles, Hrdlicka has as many detractors as admirers. Against that background, the Virgin Australia roadshow trio are bypassing Sydney and Melbourne in favour of talking to potential investors in Hong Kong, New York, Boston, and Los Angeles.

Meanwhile, the airline has also rejigged its board in anticipation of the IPO. Earlier this year, former Macquarie Bank chairman Peter Warne took on the chairman's role at Virgin Australia, while a former managing director of Goldman Sach's Sydney outpost, Pippa Downes, also accepted a board position.