The Chilean low-cost carrier Sky Airline is nowadays seeking financial options to fit their investments needs in the near future. For that purpose, top management has embarked in a non-deal roadshow with local and international investment banks in Santiago, Rio de Janeiro and New York in order to review different options to raise new funds in the midst of an ambitious expansion plan of US $1 billion, projected for 2020.
The plan includes a total fleet renewal that will add 21 brand new Airbus A320neo, with the delivery of the first 6 units taking place during 2018. They will completely replace today’s fleet composed by 13 A319-100 and 2 A320-200 by 2020. The US $1 billion fleet investment is payable within the next 20 years, the actual length of the rental contract of the aircraft, and it’s projected that this move will bolster in 24% the total seat capacity of the firm.
Up to date, all investment plans of Sky Airline since 2002 have been self-financed, nevertheless the massive size of the aforementioned expansion is unprecedented for the company, thus requiring other ways of raising capital: initial public offerings (IPOs), emission of bonds or the entry of a new strategic partner to the airline. “We’re actively searching for growth options. Our flawless and swift transition from a legacy carrier to a low-cost airline, with sustained success during the past semester, is our best presentation card when meeting with potential financial partners. It’s not a matter of if but when”, stated Holger Paulmann, CEO of Sky Airline.
Fleet renovation aside, the other large project encompassed in the investment plan is the creation of hubs in other cities of Latin America, not necessarily established in capital cities. This would result in the operation of domestic flights outside Chile. “The new fleet will give us a larger range and seat capacity, so if a new route makes sense we will explore it, just as we did with Brazil, with the opening on December 2017 of the Santiago - Rio de Janeiro and Santiago - Florianopolis routes. Operating domestic flights abroad is a different story, so one step at a time…”, says Paulmann.
Nowadays, with an estimated value of US $300 million, a hypothetical 30% initial public offering would raise US $100 million for Sky. If an IPO would be the chosen option, delaying its process isn’t a negative in the eyes of Sky’s executives, mainly because it will result in an economic valuation and consequently the raised capital for the investment would also increase. “All options are on the table at this stage. We haven’t partnered with any financial entity yet, so we will continue determining our financial roadmap during the upcoming months”, concluded Holger Paulmann.
Sky Airline, based in Santiago International Airport, transitioned from a legacy airline to a low-cost carrier on March 2017, and has been globally recognized as one of the success stories in the industry for its flawless and fast execution of a complete makeover in its business model.
Holger Paulmann is the CEO of SKY, the Chilean airline that revolutionized the aviation industry of the Southern Cone by implementing the low-cost model.
