Japan Airlines (JAL) confirmed this morning that its initial public offering (IPO) will be priced as confirmed here in January at 663 billion yen ($8.4bn) after setting the indicative price range between 3,500 yen and 3,790 yen for what will rank as the world's second-largest IPO this year after Facebook.
The listing (or re-listing depending on how you look at it) will take place on September 19th.
The very fact that the IPO pricing has a range running up to the top end of the preliminary reference price shows that interest is strong but nothing is certain in this market.
The state backed Enterprise Turnaround Initiative Corporation of Japan (ETIC), (which owns 96.5% of JAL) looks set to make a good profit on its investment in JAL.
JAL, winner of the Aviation 100 CEO of the year award in January 2012, booked a 205 billion yen operating profit for the year to March, putting it right up in the top three airlines for operating profit. JAL is forecasting profit will drop to 150 billion yen in the current year, if it makes that figure it would have done very well indeed.
JAL is a good investment. At the top end of its pricing range it will have a price to earnings ratio of 5.3 against the industry average of 16. Part of this is because JAL has an unfair advantage in its benefits from a lower interest burden stemming from debt waivers, smaller depreciation costs following a write-down of its fleet, and a $4.5 billion tax credit that it can use to offset corporate tax for the remainder of this decade. This alone should see investors wanting to get in on JAL on the 19th.
You have to feel for ANA.
($1 = 78.7400 Japanese yen)
Meanwhile check out the goings on at British Airways this week. They are reviewing their entire Indian operation after the 344% charges increase at Delhi International Airport (IGI). There remains a strong possibility that other Indian regions will follow the lead of Delhi and increase airport charges.
Lufthansa, Singapore Airlines and Virgin Atlantic have joined Indian carriers in opposing the increase in airport charges but BA is the first to openly state that it is reviewing operations. The problem is what can they do? If BA moves to fly to another airport then it could see the charges there also increase by 344% too before long. Obviously the fact that Delhi is a key route is also of paramount importance, thus it seems that travel to India is going to get a great deal more expensive very soon and this may well see businesses avoid non-essential travel that will lead to an economic impact on the city of Delhi.