Airlines hard-hit by the fallout from last week’s terrorist attacks have asked accounting regulators for a break on how they ultimately report losses stemming from the attacks on their financial statements, reports Dow Jones Newswires.
In a letter to officials at the Financial Accounting Standards Board, eight airlines have asked that a wide variety of costs related to the Sept. 11 attacks be treated as an “extraordinary item” for accounting purposes, Dow Jones reports. That would enable airlines to break those costs out from other costs, and thus to keep an event like the attacks on the World Trade Center and the Pentagon from distorting their earnings.
“The terrorist incidents and resulting closure of the United States to all air traffic and related consequences are clearly unusual in nature and infrequent in occurrence … and thus, should be considered an ‘extraordinary item,’ ” the airlines say in the letter. “The facts surrounding the terrorist acts speak for themselves.”
In any event, the airlines said, the costs associated with the attacks should be highlighted and disclosed for years to come, to make sure that earnings statements are not misleading.
The letter, dated Tuesday, was sent in response to a move by the FASB’s Emerging Issues Task Force to consider a variety of questions over how all companies affected by the terrorist attacks should report the resulting losses on their earnings statements, says Dow Jones. The EITF is meeting Thursday to discuss the matter; there has been no word whether any decisions have been reached.
Among other issues, the EITF is considering whether airlines’ loss of aircraft in the attacks and related legal-settlement costs should be viewed as an extraordinary item, says Dow Jones. AMR Corp.’s American Airlines and UAL Corp.’s United Airlines each lost two hijacked planes in last week’s attacks; both were among the airlines that signed the letter to the FASB.
In addition, among the numerous costs the airlines believe should be classified as extraordinary losses are costs related to new government- mandated security procedures; costs for unplanned crew layovers and interrupted customer trips when air traffic was halted after the attacks; severance costs tied to layoffs; increased costs for long-term disability and workers’ compensation claims related to the attacks; and the costs of closing certain airport facilities.
Airlines across the board have been crippled by a plunge in business in the wake of the attacks, with many people now afraid to fly, as well as the loss of three-plus days worth of flights when all planes were temporarily grounded immediately after the attack. The industry is seeking a government bailout, which President Bush is expected to unveil Thursday.
The airlines said their losses should be recorded on their financial statements as soon as they can be identified and reasonably estimated, according to Dow Jones. But they cautioned that many of the costs won’t be known by the end of the current quarter, or even by the end of 2001.
In addition to American and United, the letter is signed by senior finance officials of Alaska Air Group Inc.’s Alaska Airlines, America West Holdings Corp.’s America West Airlines, Continental Airlines Inc., Delta Air Lines Inc., Northwest Airlines Corp., and US Airways Group Inc.