Does the IFRS16 Matter in Determining the Profitability of Airline Industries?

ABSTRACT

The purpose of this study is to reveal the effect of IFRS 16 Leases implementation on the profitability of airline companies all over the world. The research is based on the panel data statistics of 357 airline companies in 59 countries all over the world. The time period used is seven years between 2013 and 2019 for all variables. The findings support the goal of the International Accounting Standards Board to improve the transparency of financial statements and provide the users of financial statements with more credible and comparative financial information and figures. The results of the study indicate that off-balance sheet leases capitalization due to IFRS 16 provides more relevant information than IAS 17. As it was expected, the solvency ratio has an insignificant impact on return on equity. Additionally, the positive significant impact of the share price on the company's profitability was revealed. The results indicate that in 2019 there was a decrease in the profitability of the firms. However, it is suggested that such numbers were obtained due to global macroeconomic factors such as COVID-19 pandemics or severe oil price fluctuations that influence the world economy and specifically the airline industry. © 2023, The Author(s), under exclusive license to Springer Nature Switzerland AG.