Equity finance is one of the two main forms of long-term borrowing discussed in the previous chapter. It will be addressed in more detail here. It consists of various classes of shares that are issued by the airline in return for a consideration or price. They may be subsequently bought and sold, usually through a stock exchange.
A new issue of shares can either be offered to the public or placed with financial institutions. A prospectus will be issued, showing past financial performance and short-term prospects. The issue will need to be underwritten to ensure success, and this is done by obtaining commitments from several financial institutions to take a given number of shares at a substantial discount in return for a fee. For a more risky start-up airline, a venture capital firm might be invited to take an initial stake. This will be explored more below.