Determinants of the capital structure in different business models: a panel data analysis on low cost and traditional airlines

The purpose of this study is to find out the factors that determine the capital structure of airline companies according to the business model they apply. To this end, both traditional and low-cost airline companies were evaluated with regards to the business models they employed. The study was intended to establish the factors that determine the capital structures of airline companies that employ the traditional and low-cost business models, and to determine whether there was a significant difference regarding the determinants of the capital structure of the airline groups employing these business models. Additionally, it sought to examine the consistency of the financing behaviors of airlines with the Pecking Order and Trade-Off Theories according to their chosen business models. Panel data analysis was utilized to analyze financial data of 31 airline companies that followed the traditional business model and 15 that followed the low-cost business model. This study, which examined the period of 2004-2015, used capital structure variables that were used most in the literature. The empirical findings of the study show that the long-term financing behaviors of airlines that employ the traditional and the low-cost business models are largely similar, and that airline behave well in accordance to the Trade-Off Theory. However, the results show that short-term financing behaviors of airline groups differ prominently.