Introduction
The airline industry is an expensive business, and airlines need to be able to access capital financing to operate. Airline capital financing is raising funds for an airline’s operations. Various funding sources are available to airlines, including debt financing, equity financing, leasing, and government subsidies. Airline capital financing is a critical part of the airline enterprise, as it permits airlines to invest in new aircraft, expand their route networks, and improve their services.
Airline Capital Financing Sources
Debt Financing
Debt financing is the primary source of airline capital financing. Airline debt financing ranges from bank loans to bonds and other debt tools. These loans subsidize acquiring new aircraft, expanding their route networks, and financing additional operational costs (Geelen et al., 2022). Airlines can also use debt financing to acquire other airlines or assets.
Equity Financing
Equity financing is another source of capital for airlines. Through equity financing, airlines can raise money by selling stocks and bonds to investors. Airlines also use equity financing to finance aircraft purchases, expand their route networks, and finance other operational costs.
Leasing
Leasing is a common form of financing for airlines. With leasing, airlines can finance aircraft, facilities, and other equipment over the years. Airlines often lease aircraft to reduce upfront costs and advance payments over extended periods.
Government Subsidies
Government subsidies are another form of funding available to airlines. Governments may provide airline subsidies to encourage competition and keep fares low (Geelen et al., 2022). These subsidies may include tax breaks, reduced airport fees, and other financial support.
Impact of the Jet Age on Funding Sources
The jet age had an influential impact on airline funding sources. The increased efficiency and speed of jet aircraft allowed airlines to expand their route networks and offer more services (Geelen et al., 2022). This expanded demand for air travel resulted in boosted competition and injunctions for airline capital financing. Airlines could access more financing sources to purchase new aircraft and expand their services.
Conclusion
In conclusion, airline capital financing is necessary for the airline industry. Debt financing, equity financing, leasing, and administration subsidies are the primary budget sources unrestricted to airlines. The jet age especially affected the funding sources available to airlines, as the augmented demand for air travel resulted in increased competition and requests for airline capital financing.
Reference
Geelen, T., Hajda, J., Morellec, E., & Winegar, A. (2022). Financing cycles. Social Science Research Network. Web.