IFRS 16 and the European Aviation Sector: A Comparative Analysis of the Impact on Financial Statements and Ratios Across Different Business Models of Fleet Management

IFRS 16 radically transformed the accounting for leases by replacing the dual lease classification of IAS 17 with a unique recognition model, shifting most lease reporting to the balance sheet debt side. The European aviation industry was particularly concerned by this change, given that aircraft represent a strategic and heavy asset pillar of airline companies’ operations. However, the impact on each individual industry player directly depended on the specific fleet management strategy employed, resulting in heterogeneous outcomes across different business models. This dissertation investigates the impact of the standard transition on financial statements, ratios and transparency of major European airline companies, adopting a comparative perspective between two clusters, defined by their business model structure: Mainland carriers and Low-Cost carriers. A dual static and longitudinal analysis extending through 2015-2025 evaluates both the impact at transition and the persistence of the effects, while also accounting for the Covid-19 exception. The study’s findings show that IFRS 16 intrinsically reshaped most reporting and profitability, efficiency, liquidity, and solvency indicators, although the magnitude of changes was heterogeneous, and cash flow indicators remained largely unaffected. In this respect, the analysis shows how the fleet composition and management strategy, i.e. leasing intensity, represent the real key determinants of the tangible effects of IFRS 16, with diverging consequences between the two clusters. Finally, the work assesses whether IFRS 16 achieved one of the objectives that led to its introduction, i.e. the enhancement of transparency and comparability across firms. These results, overall considered, represent the major cornerstones on which a final discussion about the impact of IFRS 16 on management, investors and auditors is carried out, emphasising the need of a deep understanding of industry-specific business dynamics.