| With the rapid development of Chinese Air-transportation Industry, Chinese Airlines will import great number of aircrafts in the coming years. It will need huge amount of financing. It is a very realistic and practical issue to find the best way of financing for these huge amount deals in order to cut down financing cost. This article focuses on the model of aircrafts financing and the interest management of huge foreign debt raised by Chinese Airlines for importing aircrafts. Which one is the best choice, operation leasing, financing leasing or direct purchase based on local bank's foreign currency loan? Floating interest and fixed interest which one should the airlines choose to reduce financing cost? This article will compare and analyze several real cases to give the answer. It is very important for Chinese Airlines to find the best way for aircrafts financing so that they will not lose in the fierce competition in both domestic and oversea markets in the near future.This article starts with the features of Airline Industry and the present situation of Chinese Airlines, by analyzing the traditional aircraft financing models,pointing out the existing problems of these models. Then, it states the possibility of Chinese Airline importing aircrafts with the new financing model under the current condition of both domestic and global economy. Give an existing example of a Chinese Airline who successfully did it. After that, it puts forward the best model of foreign currency debt interest management method that came from the practice of the largest Airline in the world. This thesis consists of four sections focusing on relevant issues.Chapter One, summarizing the present development of Chinese Air-transportation industry, analyzing the features of the industry and stating the present position of Chinese Airlines, comparing the financial status of domestic airlines with top tem Airline companies in the worldand pointing out the cost of aircraft financing and interest management of foreign debt is vital to Chinese Airline Companies.Chapter Two, following the study of Chapter One, analyzing the present model of aircraft financing and pointing out that Chinese Airline Companies should not only rely on the traditional finance model, aircraft finance leasing base on buyer's credit, but also try to use domestic foreign currency loan to purchase aircraft directly. Comparing the advantages and disadvantages of all models of aircrafts finance, analyzing the present economic situation of both China and the world, it points out the non-main trend aircraft finance model, purchasing aircrafts with domestic bank's foreign currency loan, nowadays it has become the best method of aircraft financing. Then, it proves this point with a real case study of a certain Chinese airline company who imported its aircrafts with long-term loan from domestic bank instead of financing leasing and it saved a lot finance cost with the new method.In Chapter Three, it points out that the present foreign currency loan interest management method of Chinese Airline Companies is not correct. In order to avoid interest risk, almost all Chinese airline companies fixed all foreign currency loan interest at the time they imported aircrafts. This caused their financing cost higher than that of foreign Airline Companies who used combined interest loan management method. With the study of real data of five top airline companies in different countries, it points out that it is the best way to manage loan interest that keeps 1/3 debt with floating interest, 1/3 debt with fixed interest and flexible interest management according to the conditions for the rest 1/3 debt. At last, it gives another case study for certain Chinese Airline company who cut down their interest cost by swapping a fixed interest loan to floating interest. It proves that Chinese airline companies should and may cut down their interest cost by using derivatives product.In Chapter Four,it raises some thoughts and suggestion for ChineseAirlines to improv... |
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