Transport Airlines

Mexican airline Interjet plans $1 billion IPO, wants to start flying to U.S.

Jan 24, 2013 2:27 am

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Raising money to expand into U.S. and competing against the entrenched biggies flying cross border will be Interjet’s aim.

— Rafat Ali

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ABC Aerolineas SA, the operator of low-cost Mexican airline Interjet, plans to raise as much as $1 billion in an initial public offering after backing away from selling shares in 2011.

The owner of Mexico’s No. 2 airline by passengers expects to sell stock after September, Chairman Miguel Aleman Velasco said today in an interview in Mexico City. The company scrapped a planned IPO in June 2011 after a slumping Mexican market and higher fuel costs weakened investor demand.

ABC Aerolineas intends to sell as much as 25 percent of the company in the IPO. The airline plans to triple its fleet size to 111 aircraft by 2015 from the current 37 as part of a $4 billion expansion plan financed by bank loans and the Aleman family, he said.

“Obviously we’re not going to try to be part of the Mexican stock exchange in order to sell a huge stake, or to get just a little bit of money,” Aleman said. “I’d see a time frame after the month of September, more or less.”

Aircraft Orders

Interjet, which began flying in December 2005, is expanding as it forecasts Mexico’s air-travel market will grow 50 percent over the next six years fueled by middle-class growth, Aleman said.

With 70 routes now, the company plans to add about 20 more this year, almost all of them domestic, and passenger traffic may rise by more than two million, he said. Interjet carried 6.58 million passengers during the first 11 months of last year compared with 6.42 million for all of 2011, according to the Ministry of Communications and Transportation.

The Mexico City-based airline expects to add four Airbus SAS A320s this year, along with 10 Sukhoi Co. SuperJet 100s. In addition, it announced an order for 40 new A320neo narrow-body aircraft in November and Aleman said it would have a total of 30 SuperJet 100s by the end of 2015.

“The company is now in a significant expansion phase,” he said. ABC Aerolineas’ current value may increase sixfold once the expansion plans are complete, Aleman said. The airline’s goal is to grow by tapping into the domestic market and serving underutilized airports, according to Aleman.

IPO Pipeline

Companies from billionaire Carlos Slim’s retail unit to a Mexican Pepsi bottler are lining up to sell shares on Latin America’s second-biggest stock market in 2013 after equity issuers raised a record amount last year.

The nation’s only publicly-traded airline, Grupo Aeromexico SAB, has dropped 40 percent since raising about 3.9 billion pesos ($307 million) in an April 2011 IPO. It rose 1.8 percent to 18.46 pesos in Mexico City today after dipping to a record low yesterday.

Aleman said Interjet is discussing its IPO plans with two banks, which he declined to identify as conversations are still private.

ABC Aerolineas sought to raise as much as $300 million in an initial public offering in June 2011, after hiring Grupo Financiero Banorte SAB and JPMorgan Chase & Co. The company pulled the offer because of a “complex situation” in global financial markets, according to an e-mailed statement sent Jun. 29, 2011.

The company is controlled by the family of Aleman Velasco, whose father was Mexican President Miguel Aleman Valdes, leader of the country from 1946 to 1952.

The airline is also in talks with companies including Lufthansa Technik, a unit of Deutsche Lufthansa AG, about establishing a maintenance, repair and overhaul business in Mexico, he said. Depending on the outcome of those discussions, the airline’s share offering could potentially be bigger, he said.

Expanding Routes

Mexico lost what had been its largest airline by passengers in August 2010, when Cia. Mexicana de Aviacion halted operations and sought protection from creditors.

Aleman said Interjet wants to serve some cities in Canada as well as U.S. destinations including Seattle, Boston and Houston’s William P. Hobby Airport when international flights are set to begin in 2015.

Puerto Rico and the Dominican Republic may be additional targets, he said.

Aleman said he’s been surprised by the number of U.S. travelers on Interjet flights from New York to Mexico City. “That was a phenomenon we didn’t expect.”

–With assistance from Jonathan J. Levin in Mexico City. Editors: Brendan Walsh, Jonathan Roeder

To contact the reporters on this story: Jose Enrique Arrioja in Mexico City at jarrioja@bloomberg.net; Brendan Case in Mexico City at bcase4@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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