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 prohibitthe manufactureand sale ofaircraftto certain countries due to political and economic sanctions imposed on them. Additionally, airline servicebusinessrequireslargearrayofcostlyequipment and facilities to suit the increased communication and transportation technology (Wensveen, 2011). Financing of these facilitiesisthrough loans and the issuance of stock, which is ariskyformof business financing. This has led toclosureof many airlines due to the uncertainties in the market. Notably, financing of the airlines are throughpersonalequitymoneyin theircommencementmaking it expensive and unaffordable to many.
According to Wensveen (2011) the air transport is aspeculativebusinessenterpriseand commonchannelof funds are not easilyavailable. Many banks could notofferto lend money to investors since it is a risky business. In addition, the reputation of the airline industryis marredby theperceptionthat it depends on its operatingabilityrelativelythan the worth of the company administration. This means that the smallsizeofoperationdoes not require large amounts of funds.
As the industry grew,it demanded that airlinessourcefunds from the public,thusthe Airport revenue bonds became acriticalfinancing tool to airline companies. These companiespossessasteadyrecord of creditworthy economic performance (Wensveen, 2011). These companiesearntherankof premium-grade investments in the exceptedpublicbond market. Notably, thepreservationandprobableimprovementof the tax off the hook status of this financinginstrumentiscritical. Wensveen (2011) stated that this will enable them toassemblethecapitalburdenofcoreairports. Leasing has been analternativefinancing tool in investing inthe airlinebusiness; in this case, the operational leasing contract bears the company the leasing cost without tying up its capital.