The aim of this paper is to provide deep insights regarding the capital structure of the corporation of Emirates Airlines and Etihad Airways. Both the corporations belong to the airline industry and have significant market share. This paper will discuss the risk measures of both the corporation so that the level of risk can be determined and how much return the corporations are providing on their securities. In the paper the weighted average cost of capital of the corporations is evaluated to know the cost of the capital and how much the corporations are financially leveraged.

It is important that the corporation should have optimum capital structure so that financial activities won’t face financial issues in the long run. If the corporation has financed itself more from debt than the corporation can face issues because the amount of debt has to be repaid by the organization. In the paper the dividend policy of both the corporation will be discussed to evaluate the financial performance in detail. Overall from this paper detail financial analysis of risk and return of the corporation can be done.

Importance of the Study of the corporation of Emirates Airlines and Etihad Airways

The study has huge significance because it is evaluating the capital structure of the corporation along with assessment of risk which the corporations are currently facing. In the airline industry both of these corporations are a key player and performing their activities efficiently. It is important to evaluate how the management of the corporation are taking financial decisions and whether their financial decisions are allowing the corporation to manage their expenses accurately or not. The capital structure of the corporation shows how the corporation has financed its assets and up to what extent it can face the burdened of debt [1]. In the paper the WACC and CAPM are implemented to know about the cost of capital and the level of risk which the corporation faces. CAPM describes the relation between the return and systematic risk. CAPM provides the information about the value of the stock comparing with the returns & risks [2].

Emirates Overview of the corporation of Emirates Airlines and Etihad Airways

Emirates Airline is actually an airline company in UAE, Dubai. It is considered The Emirates Group’s subsidiary which is basically owned by Investment of Corporation of Dubai. In the Middle East, it is the biggest airline. Every week, it gets more than 3,600 flights from Dubai International Airport considered its hub. It reaches almost 140 cities in total, over six continents. It has undertaken cargo activities and is recognized as the fourth-largest company when it comes to flying international passengers. Into various sectors and industries, Emirates has diversified thoroughly including tour operator functions, catering, engineering, and airport services. In March 2011, approximately 50,000 workers were employed by the company. Various benefits are provided to workers by the company such as health plans, sick leave, and paid maternity. It contributes when it comes to employment as it hires a diversity of native workers. It adopts a specific approach to maintain the competency by using merit pay and profit sharing.

Etihad Overview of the corporation of Emirates Airlines and Etihad Airways

Etihad Airways can no doubt be recognized as the flag carrier of UAE. It is the United Arab Emirates’ second-largest airline as well. The aviation company has been on a journey for 15 years now as it began functionalizing properly in November 2003. The head office resides in Abu Dhabi in Khalifa City. Each and every week, over 1,000 flights are operated by it. Along with its participation in the transportation of passengers, it operates Etihad Cargo and Etihad Holidays as well. Besides its basic operations, it also has a major role in the promotion of various cultural events, arts, and sports. Over the world, Etihad Airways is also the first airline of events linked with the Fashion Week. With the passage of past 15 years, it has become an important airline for passengers traveling to different parts of the world from Abu Dhabi. Even foreign passengers consider it when it comes to traveling.

Objective of the study of the corporation of Emirates Airlines and Etihad Airways

The objective of the study is to provide detail information about the value of the stocks and whether the stocks are fairly valued or not. Below are the financial statements of both the corporations that shows the capital structure of the corporations in detail.

EMIRATES NBD PJSC (EMIRATESNBD) CashFlowFlag BALANCE SHEET
Fiscal year ends in December. AED in millions except per share data.	2013-12	2014-12	2015-12	2016-12	2017-12
Assets
Cash and due from banks	38355	56639	54975	114297	117954
Deposits with banks			39837		1006
Trading assets	1316	832	1679	1575
Derivative assets	1777	1310	2669	3154	2852
Debt securities	-1316	-832	-1679	-1575
Allowance for loan losses					-25293
Net loans	258931	265786	270581	290396	282909
Receivables					5618
Premises and equipment	2758	2660	2396	2397	2443
Goodwill					5548
Other intangible assets	6262	6156	6031	5827	140
Other assets	33978	30470	30072	31933	51903
Total assets	342061	363021	406560	448004	470372
Liabilities and stockholders' equity
Liabilities
Deposits	263263	273645	306055	329609	347481
Derivative liabilities	1438	1646	2610	2825	2252
Other liabilities	35645	40968	47147	61709	61277
Total liabilities	300346	316258	355812	394143	411011
Stockholders' equity
Common stock	5558	5558	5558	5558	5558
Additional paid-in capital				12270	12270
Retained earnings	9826	13031	17567	21939	27404
Treasury stock	-46	-46	-46	-46	-46
Accumulated other comprehensive income	26374	28215	27665	14133	14168
Total stockholders' equity	41711	46758	50743	53854	59354
Total liabilities and stockholders' equity	342057	363016	406555	447997	470364

The Above balance sheet is showing that the corporation’s assets are financed more from debt rather than equity [3].

Period Ending:	2017	2016	2015	2014
	31/12	31/12	31/12	31/12
Total Current Assets	7493.79	6885.94	7358.57	12502.38
Cash and Short Term Investments	2192.18	1216.11	1747.57	3064.33
Cash	1192.18	866.11	-	-
Cash & Equivalents	1192.18	-	497.57	1964.33
Short Term Investments	1000	350	1250	1100
Total Receivables, Net	3734.97	4823.17	3460.6	4528.93
Accounts Receivables - Trade, Net	3682.55	3917.94	3424.09	4472.53
Total Inventory	140.58	200.07	485.86	818.07
Prepaid Expenses	1426.06	467.69	1664.54	4091.05
Other Current Assets, Total	227.63	178.9	-	-
Total Assets	40487.12	41271.49	42400.57	46644.03
Property/Plant/Equipment, Total - Net	23428.34	24495.37	24559.08	24072.53
Property/Plant/Equipment, Total - Gross	46386.18	44165.29	40983.86	37524.14
Accumulated Depreciation, Total	-22957.84	-19669.92	-16424.79	-13451.61
Goodwill, Net	1466.87	1466.87	1466.87	1466.87
Intangibles, Net	7223.68	7520.83	8026.75	8578.14
Long Term Investments	7.27	7.27	7.27	24.11
Note Receivable - Long Term	-	-	-	-
Other Long Term Assets, Total	867.17	895.21	982.05	-
Other Assets, Total	-	-	-	-
Total Current Liabilities	11935.61	17892.81	18093.79	29790.22
Accounts Payable	4695.5	4521.43	6535.87	7805.93
Payable/Accrued	4452.79	-	4361.42	-
Accrued Expenses	1618.25	1724.71	-	-
Notes Payable/Short Term Debt	-	-	-	-
Current Port. of LT Debt/Capital Leases	1410.64	7607.9	5766.26	16993.46
Other Current liabilities, Total	1376.68	4038.77	1430.24	4990.82
Total Liabilities	26233.29	26316.51	27228.32	29991.64
Total Long Term Debt	13469.03	7600.85	8508.55	-
Long Term Debt	13469.03	7600.85	8508.55	-
Capital Lease Obligations	-	-	-	-
Total Debt	14879.67	15208.75	14274.82	16993.46
Deferred Income Tax	-	-	-	-
Minority Interest	-	1.5	1.5	1.5
Other Liabilities, Total	828.64	821.35	624.48	199.92
Total Equity	14253.84	14954.98	15172.25	16652.39
Redeemable Preferred Stock, Total	-	-	-	-
Preferred Stock - Non Redeemable, Net	-	-	-	-
Common Stock, Total	7700	7700	7700	7700
Additional Paid-In Capital	-	-	-	-
Retained Earnings (Accumulated Deficit)	6560.75	7264.09	7480.42	8952.39
Treasury Stock - Common	-	-	-	-
ESOP Debt Guarantee	-	-	-	-
Unrealized Gain (Loss)	-	-	-	-
Other Equity, Total	-6.92	-9.11	-8.17	-
Total Liabilities & Shareholders' Equity	40487.12	41271.49	42400.57	46644.03
Total Common Shares Outstanding	770	770	770	770
Total Preferred Shares Outstanding	-	-	-	-

The Etihad Airways capital structure shows that its assets are financed from both debt and equity however the debt condition of the corporation is stable [4].

Analysis/findings of the Study

Weighted Average Cost of Capital WACC Emirates

			Weighted Average Cost of Capital (WACC) Emirates

Cost of Equity				Weight of Equity
	Risk-free rate	7.00%			Market Capitalization (E)	50743
	Beta	1.24			Weight of equity	0.124812141
	Market Premium	6%
	Cost of Equity	14.44%

Cost of Debt				Weight of Debt
	Interest Expense	4984			Book value of Debt	355812
	Taxrate	35%			Weight of Debt	0.875187859
	Cost of Debt	1.40%



WACC		2.60%

The weighted average cost of capital of Emirates is 2.60%. The weight of debt is 0.87 and weight of equity is 0.12. It means that the weight of debt is way higher than weight of equity [5].

Weighted Average Cost of Capital WACC Emirates

			Weighted Average Cost of Capital (WACC) Apple Inc

Cost of Equity				Weight of Equity
	Riskfree rate	7.00%			Market Capitalization (E)	16652.39
	Beta	1.17			Weight of equity	0.49493147
	Market Premium	6%
	Cost of Equity	14.02%

Cost of Debt				Weight of Debt
	Interest Expense	-269.14			Book value of Debt	16993.46
	Taxrate	35%			Weight of Debt	0.50506853
	Cost of Debt	-1.58%



WACC		6.42%

The weight of debt is 0.50 and the weight of equity is 0.49. The cost of capital is 6.42% which is indicating that the corporation should restructure its capital structure.

Conclusion on the corporation of Emirates Airlines and Etihad Airways

If all the above discussion is summarized than it is evident that the weighted average cost of capital of Emirates is 2.60%. The weight of debt is 0.87 and weight of equity is 0.12. It means that the weight of debt is way higher than weight of equity. The weight of debt is 0.50 and the weight of equity is 0.49. The cost of capital is 6.42% which is indicating that the corporation should restructure its capital structure.

References of the corporation of Emirates Airlines and Etihad Airways

[1]	M. S. Fridson and F. Alvarez, Financial Statement Analysis: A Practitioner's Guide, John Wiley & Sons, 2011.
[2]	Higgins, Analysis for Financial Management, Tata McGraw-Hill Education, 2007.
[3]	P. Christoffersen, Elements of Financial Risk Management, Academic Press, 2011.
[4]	P. Atrill, Financial Management for Decision Makers, 7 ed., Pearson Higher Ed, 2014.
[5]	A. Melville, International Financial Reporting: A Practical Guide, 6 ed., Pearson Higher Ed, 2017.