Tuesday, 5 April 2016

Is Alaska Airlines paying too much for Virgin America?

I hope this little view from downunder provides an interesting perspective on the announced purchase of Virgin America by Alaskan Airlines.

On the same day that Moody's announces a potential downgrading of  Virgin Australia credit rating, we presume because of its recent capital raising, and the announced potential sale of up to 26% of its stock by Air New Zealand - this interesting factoid appeared in an article in the Sydney Morning Herald:
Virgin Australia has a market value of $1.3 billion, less than half the Virgin America sales price, despite being a much larger airline than the US carrier in terms of its annual revenue and fleet size. 
In Australian dollar terms, Virgin America reported $2 billion of revenue last year compared with Virgin Australia at $4.7 billion. 
The first sentence figures are in US$ from what I can tell.

Let me make that a little plainer:

Turnover - Virgin AUS makes twice as much as Virgin USA
  • Virgin AUS makes AU$4.7 billion
  • Virgin USA makes AU$2 billion
Market value - Virgin AUS is vlaued at about half or Virgin USA
  • Virgin AUS valued at AU$1.71 billion
  • Virgin USA valued at AU$3.42 billion
So that means Virgin Australia at more than twice the income of its USA cousin, but is worth roughly half as much?


And I thought maths was never my strong point. Alaska, you sure you got this right?

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