A study on the impact of aircraft acquisition decisions on cash flows, leverage and profitability of Philippine Airlines Inc.

• Main Authors: Isla, Rose Anne G., Ona, Elizabeth L., Pe, Kashmir O., Tria, Krista Bianca A.
• Format: text
• Language: English
• Published: Animo Repository 2007
• Subjects: Airlines > Finance; Airlines > Management; Airlines industry > Accounting; Cash flow > Accounting; Accounting
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/14153
• Institution: De La Salle University

Airline companies acquire aircrafts via different methods. These methods provide varying levels of costs and benefits. In pursuit of the decision on the most appropriate method of aircraft acquisition for Philippine Airlines, Inc. (PAL) the researchers used three variables - cash flows, leverange, and profitability - to single out which provides the highest net benefits for the company. The researchers use a causal-comparative design to identify the different effects of each mode of acquisition on the identified dependent variables. The researchers then used the annualized net present value methods to be able to compare costs incurred by the company for each mode of acquisition. Consequently, the mode which provides the least cost is concluded to be the best option with respect to the financial facet of the decision. In addition, the researchers also studied the perception of qualified managers and employees which regard the effects of aircraft acquisition decisions on the three variables considered in this study. After analyzing the information, ther group determined that the most favorable method for Philippine Airlines, Inc. vis-a-vis aircraft acquisition decision using the three variables is to use operating lease as it provides the highest cash flow efficiency and cost savings while maintaining a good debt capacity. However, it should be noted that this research is limited to the financial aspects of comprehensive process that include other factors thus, should not be treated as the only consideration in an aircraft acquisition decision.