Airlines and COVID-19 Airlines and COVID-19
Businesses across industries around the world are facing crisis amidst the global COVID-19 pandemic. The airline industry is staring at a similar fate, with significant decline in passenger numbers. A revenue loss worth of USD252 billion has been anticipated in 2020. To prevent the industry from collapsing, government assistance worth USD200 billion is being looked at.
In such turbulent times, its vitally important that industry players are agile and holistic at risk management, including accounting risk, in parallel with direct economic risks. Driven by the European Securities and Markets Authority and other global regulators, there is a pressing need to focus on transparency in financial reporting and market disclosures. Airlines are in need to appropriately assess how fleet groundings, travel bans, economic uncertainties and market volatility may affect accounting conclusions. Such considerations may include change in depreciation methods, revision of future salary assumptions in existing liabilities, impact of extension in loyalty points expiration dates, re-assessment of forecasted fuel consumption and volumes of fuel hedged, re-assessment of existing operating leases (terms, payment schedules, option to purchase, sub-lease etc.), revision of aircraft maintenance and overhaul cost, among others.
This document is aimed at capturing the current impact of COVID19, recognizing it is an evolving and fluid global situation, and their consequent accounting/disclosure reflection for an airline player. It also provides ready reference to various accounting and audit standards and guidance to deal with each of these reconsiderations. To delve in detail, read more here.
