The Impact of Debt Financing on the Financial Performance of Airline Companies Listed on the London Stock Exchange

Background: The capital structure of airline companies is critical to financial performance due to the capital-intensive nature of the industry. While debt financing supports expansion, excessive borrowing can reduce liquidity and profitability, particularly under volatile market conditions. Methods: The study applied regression analysis on secondary financial data from four London Stock Exchange, listed airlines, International Airlines Group (IAG), EasyJet, Wizz Air, and Jet2, to examine the effect of debt ratio and debt-to-equity ratio on current ratio, return on assets (ROA), and return on equity (ROE). Results: The debt-to-equity ratio showed a significant negative effect on the current ratio, indicating that equity financing strengthens liquidity. Debt ratio had a significant negative effect on both ROA and ROE, while debt-to-equity ratio was insignificant for ROA and weakly negative for ROE. Conclusion: Excessive debt undermines liquidity and profitability in London-listed airlines, supporting the Trade-off and Pecking Order theories while challenging Modigliani–Miller’s irrelevance view. Prudent debt management is essential for sustaining financial stability and shareholder value in the airline sector.

Name dc:type.qualificationname

mba

Level dc:type.qualificationlevel

masters

Grantor dc:publisher.institution

University of Wales Trinity Saint David

Year dc:date.issued

2025

Author dc:creator

• Patel, Zeel Mihir

• HD28 Rheoli. Rheoli Diwydiannol

Dc Identifier Grantnumber

UWTSD

OAI identifier oai:identifier

oai:repository.uwtsd.ac.uk:4055