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Aviation

Designing an Award-Winning Report

As publisher of data-driven research, our team here at Euromoney Institutional Investor Thought Leadership often faces a particular challenge: how to present reports full of numbers and charts in a way that keeps the audience engaged and leaves a lasting impression.

More and more often we advise our clients to move away from PDF-only publications and opt for a clear-cut screen first approach, featuring design optimised for on-screen consumption above all.

This approach allows us to build reports that are interactive and truly engaging. We aim to constantly activate our readers’ curiosity: what’s coming next?

Deloitte-artwork-file

“Balancing the Books” is the winner of this year’s “Shorthand Communication with a Difference” award

Communication with a Difference

Balancing the Books”, which we prepared for Deloitte, examines the impact of an incoming accounting standard on the aviation finance industry. It is based on a detailed global executives survey and relies on the interpretation of a huge amount of data.

And the winners are...

“And the winners are…” (screenshot: shorthand.com)

This piece of research covers a “dry” (Shorthand’s words, not mine, although it’s hard to disagree) topic that — despite the importance of its findings — doesn’t necessarily keep readers glued to the screen.

To present our analysis we developed visual language that reflects the aviation industry. We animated planes to fly across screens, built interactive charts that resemble cockpits, flight radars and plane seating maps and created graphs that gradually reveal data as the reader scrolls down the page.

More than 100 publications were considered for this year’s Shorthand awards.

The jury, including members of the BBC College of Journalism, The Guardian, the Economist, OglivyOne, and Columbia University, voted for “Balancing the Books” for “digital storytelling at its best”.

Screenshot: "Balancing the Books"

Screenshot: “Balancing the Books”

This is thought leadership brought to life,” they wrote. “It really keeps you engaged.

We feel honoured to see our work being recognised by our colleagues from the global publishing world.

It has been a great experience to manage this project and work with the team and our partners to develop and bring together high-quality content and great design.

Our thanks go out to Deloitte for teaming up with us to produce “Balancing the Books”, and to Airfinance Journal for their invaluable expertise.

Here’s our promise: Euromoney Institutional Investor Thought Leadership will continue to strive to produce best-in-class content, in 2018 and beyond.


 

Shorthand Awards — The Jury

  • Scott Manson, director of content at OglivyOne UK
  • Jora Gill, chief digital officer at The Economist & non-executive board member at Quality Care Commission
  • Sasha Koren, editor of the mobile innovation lab at The Guardian
  • Jonathan Albright, research director at the Tow Center for Digital Journalism at Columbia University & faculty associate at Berkman Klein Center for Internet & Society at Harvard University
  • Vin Ray, founding director of the BBC college of Journalism & chair of the board of trustees at Ockenden International
  • Charley Sutton, deputy head of editorial at Barcroft Media
  • Robb Montgomery, author & teacher specialising in mobile journalism
Balancing the Books

Getting readers’ attention with a post about an accounting standard is not easy.

But when in a survey 90% of executives in an $800 billion industry suggest that one of the key pillars of their business will be subject to contract renegotiations because of accounting changes, some might want to listen up.

I’m talking about the impact IFRS 16 Leases will have on the airline industry when it comes into effect as of 1 January 2019.

Deloitte-artwork-file

What’s going on?

To understand the impact of IFRS 16 on airlines it is essential to first explain some of the basics of aircraft management, i.e. how airlines operate their fleets.

Of the roughly 26,000 commercial aircraft globally today, 38% are no longer owned by conventional airlines, data from the Airfinance Journal Fleet Tracker shows. Increasingly, planes are instead leased from specialist lessor companies. The two largest lessors, General Electric’s GECAS and Netherlands-based AerCap own and manage about 2,000 and 1,500 aircraft respectively. In the words of The Economist, they are “airlines with no passengers”.

Leasing makes sense for most airlines. Because leasing allows them to scale fleets up or down quickly when demand changes, it reduces their exposure to volatile aviation travel markets.

Leasing is also less capital intensive than buying aircraft outright.

There’s something else, though:

If an airline buys a plane and finances it with debt, the plane will show up on the balance sheet as an asset, and the associated debt as a liability. If, however, the same plane is added to the airline’s fleet under an operating lease agreement, there’s no asset or liability to be recognised under the current standard for lease accounting, IAS 17. Operating leases are – until now – means of off-balance sheet financing.

Social_1200x628_GreenThat’s advantageous for airlines, because it means that operating leases have no impact on a number of key performance metrics, such as gearing, EBITDA, or return on capital employed (ROCE).

This off-balance-sheet treatment of operating leases will change when IFRS 16 kicks in in less than 12 months. According to Fleet Tracker, a whopping $325 billion of aircraft assets will then transfer to airline balance sheets.

The impact of the associated “new” liabilities on performance metrics could cause certain domino effects. For instance, in some cases credit ratings might change. Or airlines might break certain performance-related covenants in contracts.

And that’s why airlines think that operating lease contracts will be renegotiated.

When Euromoney Thought Leadership, working in conjunction with Deloitte, recently surveyed industry experts, 90% of airline executives told us that this is what they are expecting to happen. Even a huge majority of lessors agreed.

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If the airlines are right, the sector should get ready for flurry of activity to renegotiate lease contracts, in particular, according to the survey, with regard to the lengths of leases, lease rates, and security deposits. The lessors though, despite similar expectations, might be somewhat reluctant.

David Breen, for instance, is sceptical about renegotiating. The Head of Finance at Avolon, a lessor with a portfolio in excess of 900 aircraft, told Euromoney Thought Leadership that lessors – who face extra remarketing costs from shorter leases – would resist shorter leases.

There’s also little indication that the market for aircraft leases will dry up, even if some of the advantages of leases might be less pronounced under IFRS 16.

“The core commercial reality of lease rates and lease terms will remain consistent with the supply and demand we currently have in the market,” Breen says.

The survey data, at least, does not show that the market is about to collapse. 47% of respondents said the number of operating leases would decrease, leaving a small majority to predict either no change, or even an increase.

The complete report, Balancing the Books: IFRS 16 and Aviation Finance  by Euromoney Institutional Investor Thought Leadership in conjunction with Deloitte, is available for free here.

About us

Thought Leadership Consulting creates thought-provoking content for global business leaders.

With a team of independent journalists, experienced editors and professional marketers, we create reports, surveys, blogs, articles, videos and infographics. All of our content is unbiased, original, research-driven and audience-led.

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