It remains all about FX for January 2014 as V America looks to an IPO

TESTCustomwebLP TESTCustomwebLP
By TESTCustomwebLP TESTCustomwebLP January 29, 2014 20:44

It remains all about FX for January 2014 as V America looks to an IPO

Turkish Airlines (THY) saw its prospects both demise and improve over the past 24 hours as the Turkish lira fell sharply and then rallied against the US dollar after the Turkish central bank raised the weekly repo rate from 4.5% to 10% while the overnight lending rate (top rate) rose to 12% from 7.75%, a rate that was just a few weeks ago sitting at 3.5%.

So will THY be able to continue its drive towards an IPO with all this going on in the background in its home market? The answer is of course yes, but the prospects will be tempered if the Turkish lira continues to weaken. Although we must remember that as THY expands it should be able to work to offset much of its home currency exposure.

The spectre of inflationary pressure on emerging economies continues to drive investor sentiment and with it the effect on airline revenues and cost bases is moving rapidly. One should be drawn to wonder about how the likes of Volaris and LATAM will fare in this market environment as we expand our thoughts beyond the recent APAC focus. Indeed most emerging currencies are seeing a rally, such as the South African rand, on the back of investor expectation that interest rates are going to start moving across the board. And, as they do, we must wonder when will the UK, EU, the US and China start to consider interest rate raises? Luckily for many the EU is more worried about deflation rather than inflation at this time and the Bank of England governor has made it clear that the UK rates are not moving any time soon and the USA looks set to keep things as they are for some time yet.

It is against this backdrop that Sir Richard Branson has opened talks with banks about a flotation of Virgin America. Virgin America is preparing to appoint banks to oversee an initial public offering (IPO) on one of the US exchanges within the next few months with some media outlets pointing at a $1bn valuation for the airline.

Virgin America has struggled. It was in the red for six years before last quarter went into the black and the way has been paved by recent deals to lower borrowing costs. However competition in its core sectors is gaining, which points to a hard road ahead for Virgin America even though recent figures were impressive with load factors at 81.9% last month. Therefore now is a good time to float and get out for current investors. But will new investors see through current figures? This will be a hard task for the banks appointed. Branson only has 49% ownership and only a 25% voting stake – Cyrus Capital holds most of the cards.

TESTCustomwebLP TESTCustomwebLP
By TESTCustomwebLP TESTCustomwebLP January 29, 2014 20:44
Write a comment

No Comments

No Comments Yet!

Let me tell You a sad story ! There are no comments yet, but You can be first one to comment this article.

Write a comment

Only <a href="http://www.aviationnews-online.com/wp-login.php?redirect_to=http%3A%2F%2Fwww.aviationnews-online.com%2Feditorial-comment%2Fit-remains-all-about-fx-for-january-2014-as-v-america-looks-to-an-ipo%2F"> registered </a> users can comment.