Advanced Managerial Finance
This paper will be about an IPO that was filed by Spirit Airlines for $300 million dollars in September of 2010. According to www.marketwatch.com, Spirit Airlines is the first airline to go public in 3 years. The last airline to go public before Spirit was Gulfstream International group in December 2007. Spirit plans to use half or 150 million for cash reserves , working capital, and other corporate purposes. The other 150 million of the IPO will be used to terminate a service agreement that Spirit Airlines had with Indigo Florida LP which totals 1.6 million. Spirit will pay 450 thousand dollars to three individual stockholders. The rest of the $150 million will be used to pay any unpaid commitment fees and to pay down debt held by their principle stockholders, Indigo and Oaktree Capital Management. Indigo and Oaktree provide Spirit Airlines with guarantees of $11.8 million in credit facilities In 2004, Oaktree invested funds and changed Spirit’s business strategy as a low cost carrier. According to Market Watch, Spirit Airlines represents less than 1% of annual passenger traffic in the U.S. Spirit Airlines currently provides service to the East coast, Caribbean, and Central America. In 2009, Spirit Airlines posted a profit of 83.7 million which is 3.18 a share. In 2008, Spirit had a profit of 33.3 million which was 1.29 a share. Spirit Airlines has not reported a loss since 2006. However, the first six months of 3009 had reported losses because of spiking fuel prices. The first six months of 2009, passenger revenue decreased 18% but non-ticket revenue increased 26%. Since Spirit was redefined as a budget airline in 2006, they have reduced their cost structure to one of the lowest in the United States, while unbundling their service from its base fare to charging separately for seat selection and baggage. By using these efforts, Spirit was able to...
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