Airline Business Coursework Example | Topics and Well Written Essays - 2500 words - 1

Airline Business - Coursework Example u-Taieh (2011: p58) notes that while an airline may put together the best management team and business plan, failure to access sufficient funding and finance makes short term success of the airplane impossible. At present, start-up capital required to finance the working capital needs is readily available by historic standards, specifically if the project is right for investors. This paper analyse possible sources of funding for an investor seeking to launch an airline start-up, while also discussing the advantages and disadvantages of the different sources of funding. Moreover, the paper will seek to identify factors that investors are likely to consider prior to evaluating funding requests. One source of funding that an airline start up could use is a direct lending. In this case, an airline could decide to take out an unsecured or secured loan as working capital but more specifically to purchase commercial aircraft (Wynbrandt, 2014: p47). Moreover, the airline start-up may receive a loan for a syndicate of banks since the transaction may be quite large. Since commercial aircraft costs could reach several hundreds of millions of dollars, security interest accompanies most aircraft purchase direct lending, which means that the loaning bank could repossess the aircraft if the start-up fails to pay back the loan. Generally, obtaining private financing that is unsecured to purchase an aircraft is very difficult unless the airline start-up is considered especially creditworthy. Still, there are some governments that use the Large Aircraft Sector Understanding to fund exports of aircraft produced domestically, an agreement is providing for aircraft purchase financing at clos e to 175 points for ten years over the prime rate (Wynbrandt, 2014: p47). In addition, there is also an option for the start-up airline to lock interest rates in up to twelve weeks before receiving the loan. Such terms tend to be more attractive for start-up airlines, rather than large operators,