Virgin Blue rises on share debut
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Branson launched Virgin Blue in Australia in September 2000.
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SYDNEY, Australia (CNN) -- Australian discount carrier Virgin Blue has finished its first day of trading Monday at an 8.0 percent premium, giving it a market value of Aust. $2.48 billion ($1.81 billion).
The airline on Friday set its share sale price at A$2.25 -- at the top of its indicative range -- after its initial offer was oversubscribed more than 10 times.
Eager investors bid the stock to A$2.40 at the opening before it closed 8 percent higher at A$2.43. That compared with a fall of 0.15 percent for the broader market, measured by the S&P/ASX200.
Virgin Blue is backed by Richard Branson's Virgin Group and Australian transport and logistics group Patrick Corp.
Branson told CNN Monday the airline had a free float of 29 percent after the Virgin Group increased the number of shares it sold as part of the IPO. The float raised about A$600 million ($438 million) from the sale of new and existing shares.
Branson said he hoped that in six months time, the airline would be able to increase its free float to 30 percent and so qualify for inclusion in the Australian share market index.
Originally, Virgin Group planned to sell enough shares to take its post-float stake down to 29.1 percent, with Patrick holding 45 percent, a group of Virgin Blue executives keeping a small stake and the remainder making up the free float.
But after the success of the float Virgin opted to sell down to 25.1 percent, increasing the free float from 25 percent to 29.0 percent.
Branson said there had been a "fantastic reaction" to the float, with 93 percent of the airline's staff subscribing to it, along with 250 big institutional investors and thousands of retail investors.
Virgin Blue entered the Australian scene as a discount carrier in September 2000 and in the past three years has built its market share to about 30 percent.
It became the No. 2 airline in Australia after the collapse in late 2001 of Ansett Airlines, the Australian domestic subsidiary of Air New Zealand.
The dominant Australian carrier Qantas, which has 70 percent of the market, last week unveiled details of its own low-cost domestic airline, which will start flying next May. (Full story)
Qantas, which is owned 17 percent by British Airways, has opted for Airbus A320 aircraft and is calling the new leisure carrier JetStar.
Branson told CNN Monday that Virgin Blue's ability to win 30 percent market share in three years "shows how vulnerable they (Qantas) are".
He said it did not seem logical for Qantas to start its own low-cost carrier because it would hurt its existing operations and all previous attempts by full-fare carriers to launch low-cost airlines had failed.
"But obviously, we wish them well," he said.
Qantas shares finished 0.29 percent lower at A$3.44.
