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Capital Budgeting (Theory) International and domestic travel restrictions imposed during COVID-19 outbreaks have resulted in a significant reduction in demand for airline services in Australia.

Capital Budgeting (Theory)

International and domestic travel restrictions imposed during COVID-19 outbreaks have resulted in a significant reduction in demand for airline services in Australia.

Is this an upside or downside risk for the debt capital contributors of airlines industry? Explain why. (4 marks)
What is the impact that a reduction in airlines service demand has on the cost of debt and weighted average cost of capital (WACC) for airlines companies? (6 marks)

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