The analysis of the capital structure in the aviation industry

Аuthors

Melik-Aslanova N. O.

Moscow Aviation Institute (National Research University), 4, Volokolamskoe shosse, Moscow, А-80, GSP-3, 125993, Russia

e-mail: Melik-Aslanova@yandex.ru

Abstract

Change in equity is difficult and key task that enterprise faces. In order to analyze trends in the development of aviation enterprises in Russia, the equity capital structure and financing sources of enterprises with retained earnings, non-current and current borrowings as well as those with positive financial results and investment activity were considered.
Thus, the «Irkut» Corporation has been developing successfully over the past three years and is involved in investments, in particular in manufacture of MS-21 short- and medium-range aircraft. Total project investments equal RUB 190 billion, RUB 70 billion of which shall be invested by the state. The project shall be completed by 2020. Therefore, the corporation is reducing financing of day-to-day operations and increasing the amount of long-term investment in the production of the MS-21.
Considering the commercial credits, borrowings from enterprises and loan bonds, e.g. an interest-free loan of RUB 11,600 million with a payback period up to 2020 was received from the parent company OAO «OAK», whereby debt on loans and interest-free borrowings from OAO «OAK» equaled RUB 27,019,803 thousand.
When calculating the effectiveness of raising the funds, we use a formula to determine the effect of financial leverage. By the financial leverage effect formula we can determine the influence of bank credit and bond on return on equity.
A comparison of two options shows the need to justify the structure of all capital. Thus, return on equity can be increased by 1.9% through the issue of bonds. An increase in the share of loan bonds in borrowings or a reduction in the interest rate on bank loans will ensure a further increase in return on equity.

Keywords:

capital structure, bonds, the effect of financial leverage

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