Air Berlin, Europe's third-largest budget airline, stands to raise only about half the money it had hoped to secure from its flotation after it cut the size of the share offering.
The German company said yesterday it would lower the range for its book-building debut from €15-€17.50 to €11.50-€14.50 a share and reduce the share allocation.
The move follows its decision to postpone the flotation from yesterday until Thursday of next week.
It could hamper the airline's plans to grow rapidly and challenge market leaders Ryanair and EasyJet, which are more than twice the size in terms of passenger numbers.
The disappointing reception for the Air Berlin sale will make Aer Lingus executives anxious. Aer Lingus, while a different type of airline, is due to float either in June or September, most likely the latter.
Sentiment towards airline stocks is changeable at the best of time, but the reception for the Air Berlin float suggests that Aer Lingus may have to be sold at a serious discount to be attractive.
As a result of the changes, which follow investor scepticism, Air Berlin's share offering could net the company as little as €225 million, compared with the €350410 million initially planned for the listing.
The owners could net as little as €284 million instead of €460 million and keep 29 per cent of shares.
Joachim Hunold, founder and chief executive, said oil price rises had made investors more cautious.
Their valuations fell as EasyJet and Ryanair shares suffered in recent weeks. "In the end, the pricing was the problem," he said.
This leaves Mr Hunold short of the €350 million that in April he had stipulated was the minimum needed for Air Berlin's expansion plans. The company has 55 new aircraft to finance by 2011 and wants to fly new routes to northern and eastern Europe.
The situation is also an embarrassment for lead banks Commerzbank and Morgan Stanley, who until the last moment ignored investors' worries about the impact of rising oil prices.
Investors in Germany have been slow to rediscover a taste for share offers after the technology bubble burst more than four years ago.
While many offerings have gone well, bankers said that difficulties in getting issues away was evidence of a continuing aversion to risk.
- (Financial Times service)
