Putting an end to rumors over the past few months, Indigo Frontier Group Holdings—the parent company of Frontier Airlines—filed the preliminary registration form for an initial public offering with the U.S. Securities and Exchange Commission on March 31. Frontier will trade under the ticker “FRNT.” It wants to raise $100 million through the offering. However, Frontier hasn’t specified the number of shares that would be on sale or the price of the offer. The timing also isn’t clear, although it’s speculated to take place during 2Q17.
It’s the first IPO filing by a US airline in three years. The last IPO was by Virgin America in 2014. Since then, it has been acquired by Alaska Air (ALK). However, Brazilian airline Azul also filed for an IPO earlier in the year.
Use of IPO proceeds
According to the S-1 filing, Frontier plans to use the IPO proceeds to “fund into a trust the expected cash portion of our obligations under the Pilot Phantom Equity Agreement for the benefit of the Participating Pilots in connection with the completion of this offering.” The remaining funds will be used for other corporate purposes.
However, all of the proceeds will not go to the company. William Franke, who owns 99.3% or 5.2 million shares of Frontier’s outstanding shares, will sell a portion of his shares.
In this series, we’ll discuss Frontier Airlines’ history. We’ll look at its financials and the IPO means for ultra-low-cost carriers.
Investors can gain exposure to the iShares Transportation Average ETF (IYT), which invests 23% of its portfolio in airlines. It invests 5.5% of its holdings in Alaska Airlines (ALK), 5.3% in United Continental (UAL), 3.8% in Southwest Airlines (LUV), 3.6% in Delta Air Lines (DAL), and 3.4% in American Airlines (AAL).