An analysis of the volatile financial problems currently facing the airline industry.
Written in 2002; 1,389 words; 6 sources; MLA; $ 46.95
Paper Summary:
This paper examines the reasons why more and more of the airlines today are see their profits plummet, claiming bankruptcy and are going out of business. It evaluates why airlines are so costly to operate due to rising fuel costs, rising labor costs. It examines other unforeseen factors such as the events of September 11 which have drastically reduced the number of passengers on flights. According to the author many of the tactics that have worked in the past to raise revenue will not work in today's airline market. The author summarizes that adding flights and adding new airports to their networks are not going to help increase profits if the passengers are not there to fill the seats.
From the Paper:
"Despite the fact that many analysts feel that business risk is one of the major determining factors of the capital structure of an airline or any company, the existing research does not provide a definitive answer as to whether an increase in business risk should cause it to lower its level of debt in its capital structure. Many textbooks, in fact, affirm that there is an inverse relationship between the optimal debt level and business risk. The reasoning behind this is that the presence of debt in the capital structure increases the probability of bankruptcy. Those airlines that have more business risk or more volatile cash flows have a higher possibility of bankruptcy for any given level of debt."
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