Is this the right time for an IPO?

admin
By admin September 16, 2014 19:39

Is this the right time for an IPO?

The fact of the matter is this – Avolon, Vietnam Airlines, IndiGo, Lion Air, Virgin America and others are all in various stages of heading towards an IPO. For the airlines now is the time, there is great reason for optimum with oil prices falling back even though the geopolitical situation is far from stable. But as in all things there is a mixed bag: Vietnam Airlines is still reeling from lost Chinese route business due to tensions between Vietnam and China and Virgin America has just seen its staff unionise. The company in a real race is IndiGo – it has a great story to tell investors and it needs to get the IPO off before investors realise that the new Indian parliament is moving slower than one would have hoped for on relaxing aviation regulation and of course before AirAsia India and Vistara get rolling, along with maybe an Air India Express low cost venture.

But the real slow burner is Lion Air and for that reason it is maybe the one to wait for. Lion Air has the delivery slots for 737-900ERs, ATR72s, Neos and Max aircraft – all the most popular types of the moment and likely as not of the next five years and it has the ability to place the aircraft at profit on short term lease agreements due to the order prices paid. Then there is the fast emerging MRO in the shape of BATAM that can only really be compared to the HABOM facility in Turkey in terms of sheer scale.

BATAM will most likely not be included in any IPO as the salary cost edge the facility will have over all other MROs in South East Asia must surely lend itself to having a significant investor buying-in in the form of either SIAEC or ST Engineering well before any IPO for Lion Air. But even though Lion Air might wish to IPO the airline and keep hold of the leasing arm (Transportation Partners) and the MRO (BATAM) there will be increasing logic as time passes to having a fully integrated IPO covering all three Lion Air ventures – This would be a very attractive investment indeed.

Even though anyone at Lion would tell you that an IPO is just a thought at this time, one wonders if the political situation in Indonesia will bring forward this thinking to a 2015 date. Indonesia is coming of age. The constitutional court has confirmed Joko Widodo as the president in waiting and this is a man with a plan to stabilise and grow Indonesia into a business-friendly nation with a growing middle class that will feed tax revenues for infrastructure projects. Given the geography, the population size and the seeming renewed business friendly political stance of the nation, there can be few countries with more potential and few airlines that can match Lion Air in trying to tap that potential. So in all this we should also keep a keen eye on Garuda Indonesia as it positions for rapid growth with the help of banks and lessors alike.

admin
By admin September 16, 2014 19:39