Wensveen (2011) argued that globalization has made the world one economy, which has increased competition and lowering costs providing airline with more products that suits their needs. This has increased the economic efficiency of many countries (Wensveen, 2011). However, many countries prohibit the manufacture and sale of aircraft to certain countries due to political and economic sanctions imposed on them. Additionally, airline service business requires large array of costly equipment and facilities to suit the increased communication and transportation technology (Wensveen, 2011). Financing of these facilities is through loans and the issuance of stock, which is a risky form of business financing. This has led to closure of many airlines due to the uncertainties in the market. Notably, financing of the airlines are through personal equity money in their commencement making it expensive and unaffordable to many.
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According to Wensveen (2011) the air transport is a speculative business enterprise and common channel of funds are not easily available. Many banks could not offer to lend money to investors since it is a risky business. In addition, the reputation of the airline industry is marred by the perception that it depends on its operating ability relatively than the worth of the company administration. This means that the small size of operation does not require large amounts of funds.
As the industry grew, it demanded that airlines source funds from the public, thus the Airport revenue bonds became a critical financing tool to airline companies. These companies possess a steady record of creditworthy economic performance (Wensveen, 2011). These companies earn the rank of premium-grade investments in the excepted public bond market. Notably, the preservation and probable improvement of the tax off the hook status of this financing instrument is critical. Wensveen (2011) stated that this will enable them to assemble the capital burden of core airports. Leasing has been an alternative financing tool in investing in the airline business; in this case, the operational leasing contract bears the company the leasing cost without tying up its capital.
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