By Tracy Rucinski
CHICAGO (Reuters) – Airlines are facing the challenges of tax reductions they receive from U.S. states as a result of a political debate over voting rights, provoking a war. in the country between politics and profits.
A Republican backlash that Delta Air Lines (NYSE 🙂 faced in their home state of Georgia after they called new restrictions unacceptable is spreading to Texas as some corporations conflict with the Republican lawmakers there.
Democrats said stricter regulations were not democratic and would hurt Black voters in particular.
American Airlines (NASDAQ 🙂 and United Airlines have spoken out against the measures to restrict voting access, sparking angry backlash from Republicans who say bills oppose fraud. .
After Delta announced Georgia’s Republican-backed voting bill last week, a number of lawmakers tried to end the country’s lower jet fuel tax.
Airlines are now concerned that the tax cuts that allow them to lower fuel costs could be used by Texas lawmakers in retaliation for opposing the new voting law, who are familiar with their thoughts. said.
“We kept our eyes on it as a possibility and I think it goes without saying that we wouldn’t like it,” one said, asking for anonymity.
On Tuesday, Texas Governor Dan Patrick tore the companies apart for opposing the bill and accusing the US chief executive of not reading it, which the airline denies.
The clashes have shed light on the dependence of some US carriers on state tax cuts to cut their fuel costs, the second biggest expense for airlines after employment, and a heavy expense on a razor thin margin.
“There’s one thing you spend a lot in the aerospace business and that’s fuel,” said US aviation analyst Bob Mann.
“So they spend a lot of time trying to avoid taxes or eliminate taxes where they can. It’s a weapon of competition.”
Airport and fuel costs can influence airlines’ decisions about where to add flights, and most states “really want more, not less” air services. said an executive director at a small US airline.
IS RECORDING THREE
This is not the first time airlines have seen tax breaks under a microscope after they have engaged in political topics.
In 2018, Georgia temporarily removed its tax exemption after Delta ended its relationship with the National Rifle Association following a school shooting in Parkland, Florida.
The waiver would save Delta $ 40 million per year, a small amount compared to a total fuel bill of $ 9 billion but enough to impact the frontier lines. In the end it won tax credits.
Delta is the largest employer in Georgia and its Atlanta hub generates significant revenue for the state.
North Carolina threatened to abolish fuel tax exemptions for American Airlines, with a hub in Charlotte, after it objected to state law on transgender baths, but ultimately refused.
As hot national issues come into effect after Trump’s presidency, business calculations are changing.
The leaders of major US airlines have decided that decision-making on issues such as citizenship is increasingly important to protect their brands and appease their employees, the sources said. like customers.
For now, that overshadows concerns about whether those decisions could impose items like tax breaks, they added.
However, the prolonged attention to tax cuts could rekindle hearts between US carriers and rivals about what constitutes unfair aid.
In 2015, Delta, American and United – the so-called Big 3 – accused Gulf airlines of benefiting from $ 42 billion in public subsidies including fuel insurance concessions and tax policies.
Emirates, Qatar Airways and Etihad denied the complaint, saying that the US carriers themselves had received support.
“The airlines are not immune to two-headed behavior. They disparage government involvement in anything until it is in their favor, at the time they were all about it,” says Mann. .
The US aviation industry sources reject any comparison with the Gulf trade dispute.
“Talking about state-subsidized airlines compared to a number of tax exemptions of vastly different sizes and ranges from whether a particular state chooses to tax jet fuel,” said one person. to speak.
US airlines have struggled to act in unison over a previous commercial dispute or recent domestic political conflict.
That adds to a layer of complexity in Texas, where analysts argue that it will be difficult for lawmakers to punish the Big 3 without harming Southwest Airlines (NYSE 🙂 Co, which does not directly oppose the projects. voting law.
“Southwest’s biggest mandate right now is to win customers and survive a pandemic without alienating 50% of the population,” said one person familiar with its thinking.