EBITDAAL stands for Earnings Before Interest, Taxes, Depreciation, Amortization, and After Leases. It is a non-GAAP financial metric that starts with standard EBITDA and adjusts for the effect of lease obligations on reported earnings, which lets you compare a company that owns its major assets against one that leases them without the financing choice distorting the result. The metric shows up most often in airline analysis, where roughly 60% of the global fleet is leased rather than owned, but it applies to any industry where lease costs are large enough to skew operational comparisons.
The first four add-backs match ordinary EBITDA. Interest expense comes out so debt loads do not muddy the operating picture. Income tax expense comes out because tax bills depend on jurisdiction, credits, and deferred tax timing. Depreciation and amortization are non-cash charges that spread the cost of physical assets (terminals, ground equipment) and intangibles (software, route authorities) across their useful lives. Adding all four back approximates the cash an operation produces before financing and accounting choices weigh in.
The distinguishing piece is the lease adjustment. In airline analysis, it targets aircraft lease expense specifically, not office space or ground vehicles. A carrier that owns its planes reports depreciation and interest tied to those aircraft. A carrier flying the same planes on lease reports a lease expense instead. Comparing the two without neutralizing that difference compares financing strategies, not operating skill.
How to Calculate EBITDAAL
The most common starting point is net income from the company’s income statement, found in its annual 10-K or quarterly 10-Q. From there, add back each component the metric is designed to strip out:
EBITDAAL = Net Income + Interest Expense + Income Tax Expense + Depreciation + Amortization + Aircraft Lease Expense
Interest and income tax expense sit as separate line items near the bottom of the income statement, just above net income. Depreciation and amortization are sometimes combined into a single line inside operating expenses; if you need them broken out, the notes to the financial statements or the cash flow statement will separate them. Aircraft lease expense is typically disclosed within operating expenses or detailed in the lease commitment footnotes. Isolate the aircraft-specific figure rather than grabbing total rent, which may sweep in terminal space and ground equipment.
You can also start from operating income (sometimes labeled EBIT), which already excludes interest and taxes. That shortens the formula:
EBITDAAL = Operating Income + Depreciation + Amortization + Aircraft Lease Expense
A Worked Example
Say a regional airline reports the following for the year: net income of $120 million, interest expense of $45 million, income tax expense of $40 million, depreciation of $80 million, amortization of $10 million, and aircraft lease expense of $95 million. The math:
$120M + $45M + $40M + $80M + $10M + $95M = $390 million EBITDAAL
That $390 million represents the airline’s cash-generating power from flying passengers and cargo before financing structure, tax situation, or fleet ownership decisions touch the numbers. An analyst comparing this carrier to a rival that owns most of its fleet is now looking at the same kind of output from both operations.
Why the Metric Exists: The Shift from EBITDAR
Before EBITDAAL, analysts in lease-heavy industries used EBITDAR, where the “R” stood for Rent. The formula worked because operating leases lived entirely off the balance sheet. A carrier leasing 200 aircraft reported a large rent expense on the income statement, and EBITDAR added it back. Clean math, easy line item.
New lease accounting rules changed that. IFRS 16 became effective for international reporters in 2019, and ASC 842, the U.S. GAAP equivalent, took effect for public companies the same year. Both standards require companies to bring most operating leases with terms longer than 12 months onto the balance sheet as a right-of-use asset paired with a lease liability.1KPMG. Lease Accounting: IFRS Accounting Standards vs US GAAP The old off-balance-sheet treatment is gone, and the income statement presentation of lease costs shifted in ways that broke the EBITDAR formula.
The two standards handle the income statement differently, and that difference matters when you calculate EBITDAAL. Under IFRS 16, every on-balance-sheet lease is treated like a financed purchase. The right-of-use asset is depreciated and the lease liability produces interest expense, so the old single rent line disappears. Standard EBITDA already adds back depreciation and interest, which means EBITDA itself now captures what EBITDAR used to. The “AL” label signals that the analyst has accounted for this shift and that the resulting figure is comparable to pre-standard EBITDAR.
The US GAAP Wrinkle
Under ASC 842, treatment splits by lease classification. Finance leases work like IFRS 16: the right-of-use asset is amortized and the liability produces interest, both reported separately. Operating leases under ASC 842 still produce a single, straight-line lease expense reported as an operating cost. So for a U.S. airline reporting under GAAP with operating leases on its aircraft, the lease expense still appears as a recognizable line item, much like the old rent expense did.
The practical consequence: when calculating EBITDAAL for a U.S. GAAP reporter with operating leases, you still need to identify and add back that lease expense explicitly. It is not automatically captured in the depreciation and interest add-backs. For an IFRS reporter, standard EBITDA may already do the work, and the “AL” designation is more about signaling comparability than requiring another mechanical adjustment. Getting this wrong produces an apples-to-oranges comparison, which defeats the purpose of the metric.
Using EBITDAAL in Analysis
The most common application is peer comparison across airlines with different fleet strategies. About 60% of the world’s commercial aircraft are leased, and that average masks wide variation between carriers.2IATA. More Aircraft Are Leased Than Owned by Airlines Globally A legacy carrier that bought its widebodies decades ago and a newer competitor leasing narrowbodies on 12-year terms will report wildly different expense structures even when they generate similar cash from operations. EBITDAAL removes that noise.
The EBITDAAL margin, calculated by dividing EBITDAAL by total revenue, shows how efficiently an airline converts ticket sales and cargo revenue into operating cash flow before capital structure effects. A carrier running a 20% EBITDAAL margin is extracting more operational profit per dollar of revenue than one at 12%, regardless of who owns the metal.
EV/EBITDAAL for Valuation
Analysts often calculate Enterprise Value divided by EBITDAAL to gauge relative valuation. Enterprise value includes market capitalization plus net debt and capitalized lease obligations, so the numerator is structurally consistent with a denominator that has stripped out lease effects. A lower multiple than peers suggests the stock may be underpriced for the operational cash flow it generates; a higher one reflects a growth premium or market optimism.
That consistency is what makes EV/EBITDAAL more useful than simpler ratios for lease-heavy businesses. A price-to-earnings ratio, by contrast, compares one carrier burdened by lease expense against another burdened by depreciation and interest on owned aircraft, so the resulting number tells you more about accounting treatment than about business quality.
SEC Disclosure Rules When a Public Company Reports EBITDAAL
Because EBITDAAL is not defined under GAAP, any public company that presents it to investors must comply with SEC Regulation G. The regulation requires two things whenever a company publicly discloses a non-GAAP financial measure: a presentation of the most directly comparable GAAP measure, and a quantitative reconciliation showing how the company moved from the GAAP number to the non-GAAP one.3eCFR. 17 CFR Part 244 – Regulation G For EBITDAAL, the most directly comparable GAAP figure is typically net income or operating income.
The SEC also prohibits non-GAAP measures from being misleading. Staff guidance says a measure can cross that line by excluding normal, recurring operating expenses necessary to run the business, by making adjustments inconsistently between periods, or by applying one-sided adjustments that strip out charges while ignoring gains from the same period.4U.S. Securities and Exchange Commission. Non-GAAP Financial Measures Aircraft lease expense is unquestionably a recurring operating cost, so a company presenting EBITDAAL needs to be transparent that it is removing a real, cash expense from earnings rather than dressing it up as a one-time item. Clear labeling, consistent period-over-period application, and a reconciliation a non-specialist investor can follow are the practical requirements.
Limitations
Every EBITDA variant, EBITDAAL included, faces the same objection: it adds back real costs the business must eventually pay. Depreciation reflects the fact that aircraft wear out and need replacement. Interest reflects the cost of borrowing to fund that replacement. Lease payments are actual cash leaving the company every month. Adding all of them back paints a picture of profitability that no airline actually gets to keep, and the gap between EBITDAAL and free cash flow can be large for capital-intensive carriers.
The metric also ignores working capital swings. An airline can post strong EBITDAAL while hemorrhaging cash because fuel price spikes forced prepayments to suppliers or ticket refund obligations drained short-term liquidity. EBITDAAL says nothing about whether the company can meet next month’s payroll.
Because EBITDAAL is not a GAAP measure, there is no universal definition. One analyst might include all aircraft-related lease expenses; another might limit the adjustment to widebody fleet leases and exclude regional jets. One company might start its reconciliation from net income while a peer starts from operating income and makes different adjustments along the way. That inconsistency makes cross-company comparisons less reliable than advocates suggest, and it leaves room for management to pick the version that flatters their results. Pairing EBITDAAL with free cash flow, leverage ratios, and the GAAP reconciliation gives a more honest read on financial health.
How EBITDAAL Differs From Related Metrics
The alphabet soup of EBITDA variants trips people up. The main distinctions:
- EBITDA: Earnings before interest, taxes, depreciation, and amortization. The base metric. Works well for comparing companies with similar asset ownership structures but falls short when lease costs vary widely between peers.
- EBITDAR: Adds rent back on top of EBITDA. The pre-2019 standard for airlines, hotels, and retailers with major lease exposure. Still referenced, but its usefulness eroded once lease accounting reform moved most rent off the income statement for IFRS reporters.
- EBITDAAL (or EBITDA-AL): The post-reform successor to EBITDAR. Adjusts for lease obligations under the new accounting framework, whether that means adding back a surviving operating lease expense line under US GAAP or confirming that the depreciation, amortization, and interest add-backs already captured the lease effect under IFRS.
- EBITDAL: A different metric entirely. The “L” stands for special losses, not leases. EBITDAL strips out unusual, non-recurring losses to show what earnings would look like in a normal operating year. Do not confuse it with EBITDAAL.
The right metric depends on the industry and the question. For airline peer comparison where fleet financing strategy varies, EBITDAAL is the most informative of the group. For a retailer comparing stores it owns against stores it leases, EBITDAR or a similar lease-adjusted measure may still be the better fit. In every case, the non-GAAP number is a starting point for analysis, not the final word on a company’s value.