FINANCING AIRLINE RE-EQUIPMENT TO 1987: WHERE IS THE MONEY TO COME FROM?

This article highlights the major points incorporated in an address on airline financing. It is noted that from the post-war period until the oil crisis of 1973/74, the airlines made record investments in new equipment. By the mid-1970's traffic growth had slumped causing a severe drop in earnings. The coming together of a short fall-off in traffic, serious over-capacity, rising operating costs and a heavy debt load resulted in a crisis situation. It is now apparent that a much larger proportion of future airline financing requirements will have to be raised externally. In general, the major source of finance for U.S. carriers has been commercial banks. These loans were unsecured, based on the credit-worthiness of the airline and the amount of government support it received. U.S. airlines were also able to borrow from insurance companies offering longer repayment periods. It is noted that airlines are now expected to improve the efficiency and productivity of their existing equipment and operations if they are to generate sufficient financial reserves to help finance the next round of acquisitions of more productive aircraft. A suggested remedy is for the financing agencies of the aircraft manufacturing countries to extend their terms from ten to fifteen years. Other techniques include long-term leasing, with the lessor having 20-30 percent equity in the leasing entity. It is ultimately vital to the well being of both the manufacturer and the purchaser that ways be found to permit the acquisition of airliners which can operate profitably.

Media Info

  • Pagination: p. 42-43
  • Serial:
    • Interavia
    • Volume: 33
    • Publisher: Jane's Information Group
    • ISSN: 0020-5168

Subject/Index Terms

Filing Info

  • Accession Number: 00173834
  • Record Type: Publication
  • Source Agency: Interavia
  • Files: TRIS
  • Created Date: Jul 29 1978 12:00AM