Impacts Of Access To Aircrafts On The Airline Companies’ Capital Structure

Airplanes have always been the most important fixed assets for airline companies.The way airline companies bringing in fixed assets will exert tremendous influence on its capital structure.Since Chinese airline companies tend to be capital-intensive and have similar financing pattern,analyses on their access to aircrafts can be significant to their capital structures.This paper is composed of four parts in studying the impact of different access to aircrafts on the air company’s capital structure.Firstly,introduction to the decision-making mechanism of access to aircrafts and decision-making mechanism of capital structure.The former discusses the existing access to aircrafts and the decision making process.The latter discusses the concept and significance of capital structure,cost of capital,capital structure theory and factors in capital structure decision-making.Secondly,analysis of Chinese airline companies’ current access to aircrafts and current capital structure.The former takes a look at the airlines’ fleet structure and ways of access to aircrafts,the result of which shows that in recent years the proportion of leveraged acquisition of aircrafts drops,while that of aircraft leasing increases.The latter addresses the airlines’ capital structure mainly from four aspects,i.e.asset-liability ratio,long-term leverage,shareholders’ equity ratio and ROE,the result of which shows that in recent years the top three airlines’ capital structure prioritizes debt to equity,and leasing cost is rising while financing cost is declining year by year.Thirdly,discussion of the impacts of access to aircrafts on the airline companies’ capital structure from both qualitative and quantitative perspectives.Qualitative research shows,operating leases of aircrafts exert the greatest influence on the capital well-being of the airlines,followed by financing lease,while leveraged acquisition coming last.Quantitative research shows,the higher the proportion of leveraged acquisition and financing leases of aircrafts,the worse the capital structure is.The higher the proportion of operating leases of aircraft,the better the capital structure is.Lastly,conclusions,shortfalls and recommendations based on previous discussions and analyses.