BURLINGAME -- Virgin America, the only Bay Area-based airline, filed Monday for an initial public offering, adding yet another high-profile deal to an already record-breaking year for IPOs and potentially beefing up the small carrier to offer more trips.
Virgin America has built itself into a high-tech, customer-focused and lower-cost airline favorite over the past decade, one of the few scrappy carriers in an industry that has consolidated into a half-dozen behemoths. Virgin did not say how many shares it plans to sell and offered an estimate of raising $115 million during the IPO, although that number is likely to change. Financial regulations won't allow Virgin to price shares until the third week of August, and the company may wait longer than that.
With cash raised from the public offering, the airline said it plans to add flights, airplanes and services. Analysts say it could potentially steal customers from competitors such as Southwest and Alaska Air and give travelers another option in an industry that now charges for ordering a can of soda on the plane. Virgin offers both soda and ESPN on the house.
"I think it's really good news," said Douglas Quinby, vice president of research at PhoCusWright research group. "Virgin has been an interesting competitor and certainly a leader with regard to the traveler experience."
With more flights into and out of San Francisco, the region could see an economic boost from more out-of-town visitors, particularly as the economy improves and travel becomes more financially feasible for families, Quinby said. The Burlingame-based airline also plans to add its first flights at Dallas Love Field in October and expand service at New York LaGuardia and Reagan International Airport in Washington, D.C., according to financial filings. Virgin, which operates out of San Francisco and Los Angeles, said it will add more flights to new cities from those airports, and has leased 10 new airplanes that will be added to the fleet over the next two years.
But Virgin's growth will be limited because it will be competing for terminals with American Airlines and United Airlines, said Henry Harteveldt, a travel industry analyst with Atmosphere Research Group. And the carrier is already using the maximum terminal space and dates allowed by San Francisco International Airport, so to add more flights would mean canceling other trips.
"They are at the point where they need to rob Peter to pay Paul," he said.
Virgin became profitable last year, netting more than $10 million, according to financial filings. Its revenue increased about 6.9 percent to $1.4 billion from 2012 to 2013, and was up slightly -- $12 million -- during the first quarter this year from the same quarter last year.
But the company also is burdened with more than $750 million in debt, and must pay a hefty licensing fee to Virgin Group, founded by businessman Sir Richard Branson.
"There are a lot of things in this (filing) that are going to cause investors to look at this and question whether they should put money into this company," Harteveldt said. "This isn't Twitter. This isn't an IPO that is going to produce thousands of instant millionaires."
But Virgin is now in line to join a hot IPO season this fall, when China-based Internet giant Alibaba is expected to go public on the New York Stock Exchange. Virgin's announcement underscores the widely held sentiment that 2014 is an excellent time to take the IPO plunge. The second quarter of this year saw the most IPOs of any quarter in the past decade -- a total of 91 companies debuted on public stock markets, up from 62 IPOs in the same quarter last year and 33 in 2012, according to research and consulting firm Ernst & Young.
With just 53 planes flying to 22 airports in the U.S. and Mexico, Virgin is still a fraction the size of the leading carriers. Last year, Virgin carried 6.3 million passengers, less than 6 percent of the total passengers that flew on American Airlines flights. Jockeying with other carriers for passengers will be challenging, experts say, because the big airlines have restructured so many times over the past decade that they are able to compete on ticket prices, Quinby said.
But cushy services like leather seats, WiFi, movies and live TV helped Virgin rank No. 1 as the best airline based on consumer satisfaction in both 2012 and 2013, according to the Airline Quality Rating report, which is based on consumer feedback from the U.S. Department of Transportation's monthly Air Travel Consumer Report. It also had the best record for baggage handling in 2013 among all airlines, and ranked among the best airlines by Consumer Reports in 2013.
Virgin's digital play has also surpassed many of the legacy airlines -- its website and social media carry the sophistication of a Silicon Valley company, experts say. Last year Virgin made a deal with GoPro to offer an in-flight channel that features hours of GoPro videos, action sports footage shot with the small video camcorder.
Bay Area resident Dan Lazarus flew Virgin America to New York City and called it "the best airline I've ever used."
"It had a cool atmosphere, with dimmed blue LED lights," he said. "If I recall, there were "Game of Thrones" episodes available. There was also a limited music playlist on the monitor. I listened to a Beach Boys playlist that I created on the spot."
Contact Heather Somerville at 510-208-6413. Follow her at Twitter.com/heathersomervil.
CEO: C. David Cush
Travel hubs: San Francisco and Los Angeles
Flies to: 22 cities in the U.S. and Mexico
Planes: 53, with 10 more added starting next year
Departures for 2013: 58,215
Passengers 2013: 6.3 million
Revenue 2013: $1.4 billion
Profit 2013: $10.1 million
Debt: $753 million