Pandemics & aviation: is time for new standards?
Aviation is regularly affected by global pandemics outbreaks and is, in fact, one of the first industries to feel their impact. While COVID-19 impact is by far the greatest, previous outbreaks of the past, such as Swine flu ten years prior, had also had their fair share of impact on aviation. Is it time to adjust accounting standards to these realities, asked Gediminas Ziemelis, chairman of Avia Solutions group at the opening of AIR Convention Digital Week.
Previously a company’s earning used to be measured in EBITDA (earnings before interest, taxes, depreciation, and amortization), but nowadays investment banking and financial community is getting used to a new term EBITDAC, meaning earnings before interest, taxes, depreciation, amortization, and corona, says Gediminas Ziemelis, Avia Solutions Group chairman, speaking at AIR Convention Digital Week.
While COVID-19 is so far the largest, it is by no means the first global pandemic to have an impact on the aviation industry. For example, due to the Swine flu pandemic, airlines lost $4.5 billion in 2009-2010, based on IATA’s estimations. Keeping in mind that the global fleet stood at 19 800 commercial aircraft at the time, the pandemics’ influence translates into $220,000 loss per aircraft.
However, COVID-19 pandemic is likely to “cost” aviation 14 more than Swine flu did, as IATA’s estimations indicate $63 billion hit in 2019-2020. As the global fleet has grown to 28 000 commercial aircraft, the estimation translates to $2.25 million minimal loss per aircraft within 10 years.
“We have a global pandemic every 10 years, which has a strong financial impact on commercial aviation,” observed G. Ziemelis. Describing pandemics' impact on aviation as “regularity, he called for discussion among auditors and regulators on whether it was time to change IFRS accounting standards to allow airlines to create budget for future turbulences.
The situation in which an airline announced record dividends and the following month appealed to the government for state aid, saying that otherwise it would go bankrupt could not last, said the Avia Solutions Group chairman.
AIR Convention Digital Week hosts 30+ global aviation executives discussing how aviation is reshaped by the COVID-19 virus effects and the paths to recovery. Watch the event on aerotime.aero, every day at 2 CET on June 15th – June 19th, 2020.
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