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Advisor(s)
Abstract(s)
The aim of this paper is to explore the use of aircraft leasing as a financing
instrument in the low-cost carriers’ sector. These airlines have been showing a
huge growth in the customers’ preferences, while aircraft leasing plays a
relevant role in the financing options of airlines. In this study we determined
that lease future commitments represent on average 80% of other debt
commitments in low-cost carriers. Furthermore, we discovered that the leasing
rate in low-cost airlines (49%) is superior to the global average (39%), partly
explained by the lower capital requirements that a lease offers comparing to a
purchase. We found a high negative correlation between average fleet age and
use of leasing. The reason is that leases allow the airlines to renew the fleet
more easily and get younger aircraft (in fact, 67% of the leased aircraft are
newly-manufactured, something unlikely to happen with purchases). Negative
correlations were also found between use of leasing and the variables of fleet
size, on-time performance, profit margin and debt ratio, but without statistical
evidence. Use of leasing is best explained by average fleet age and fleet size,
meaning that variables related to the constitution of the fleet are better in
explaining the use of leasing by low-cost carriers than performance or
financial measures.
Description
Keywords
Aircraft leasing Financing instruments Airlines Lowcost carriers