3 Links I Love: Delta’s New Tax Strategy

Nov 13, 2015

More Reading on This Topic: Delta, Maintenance

Today’s featured link:
Wall St analyst report: Delta may create overseas subsidiary – ATW
Rumors abound that Delta is going to create some foreign companies to house its international joint ventures. Why? To avoid taxation of course. That’s why every company leaves the US.

Honestly, it’s hard for me to blame Delta. If our government can’t get its act together on a tax system that prevents this sort of behavior, then why shouldn’t Delta do this? Yes, it’ll piss people off, but I doubt travelers will change their behavior. (If people really cared, they wouldn’t buy Apple products.)

What do you think?

Links I Love

Two for the road:
Can Airlines Make Money? – Priceonomics
This is a good read about the history of profits (or lack thereof) in the airline industry.

The Disturbing Truth About How Airplanes Are Maintained Today – Vanity Fair
Nothing to see here. Just another article talking about the evils of outsourcing. There’s really nothing new in this piece, but it’s always good for generating discussion.

Brett

14 responses to “3 Links I Love: Delta’s New Tax Strategy”

Kilroy

Nov 13, 2015 at 6:11 am

The Priceonomics article is good, but the quote about state capitals is misleading. Olympia, Salem, and Dover are all rather small cities, and are all 50-75 miles from significant international airports. Sure, they may not have direct service, but when a large airport is a 50-90 minute trip away, I have a hard time being sympathetic. Many people in the NYC metro area live at least 50 minutes away from JFK and/or EWR when traffic is considered.

On the maintenance issue, I would be surprised if the airlines do not have some their own mechanics on site at the foreign shops full time, or at least doing frequent surprise inspections of the operations and the work quality. This is what major brands that outsource manufacturing to China (think Nike, Apple, etc) often choose to do, both for quality and ensure they are not contracting work to sweatshops, and it helps keep the suppliers honest.

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kevinaalexander

Nov 13, 2015 at 6:15 am

I think the VF article will mostly result in a resounding “and?” from the aviation community, and a resounding “meh” from most of the traveling public. What it /will/ likely do is drive click through traffic volume up at VF.com, and will probably help Mary Schiavo meet her weekly quota for airtime on CNN…

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Kilroy

Nov 13, 2015 at 6:15 am

Also, Brett, any chance you could do an in-depth article describing the process A/B/C/D checks, and the coordination and planning required for those and other MRO activities? Might be a good excuse to interview someone about it, too. Beyond just what is on the list for each check, I would love to know all the elements that the airlines have to consider to make it come together logistically.

Thanks.

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1. CF
  
  Nov 13, 2015 at 4:27 pm
  
  Kilroy – I’ll think about that, but here’s something to get you started.
  http://www.aviationpros.com/article/10388655/whats-this-a-check-c-check-stuff
  
  Reply
  1. Nick Barnard
    
    Nov 13, 2015 at 5:46 pm
    
    Thats pretty good article.. Although if you could score an interview with a DL maintenance guy, I’m sure that’d be a great read.
    
    Reply
  2. Kilroy
    
    Nov 13, 2015 at 7:41 pm
    
    Thanks, Brett. Interesting article, but I am sure at least one one airline’s PR team would love to have an excuse to tell you all about how safe and excellent their maintenance is, especially after (knock on wood that it doesn’t happen any time soon) the next mainline crash in the US.
    
    Reply
    1. Nick Barnard
      
      Nov 13, 2015 at 7:55 pm
      
      Oh, I’d expect all carriers would be quiet about their maintenance procedures after a crash. (beyond saying “We comply with all applicable FAA regulations and directives.”)
      
      It used to be (and probably still is) airline policy that advertising is pulled when a crash happens, even if it is one of their competitors. That makes business sense as they’re trying to distance themselves from the crash.
      
      Reply
Eric Morris

Nov 13, 2015 at 6:54 am

Plus, the Delta sub can get Ex-Im Bank financing since the “conservative free-market” and “anti-big business” parties rolled over on reviving that dastardly bank.

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southbay flier

Nov 13, 2015 at 7:38 am

1) Delta’s shareholders will like the move since it results in more products. Hopefully, Delta will use some of the money to improve its product. But, I don’t think anyone will care. People would still buy tickets on the ME3 even if the subsidy allegations are true and they use slaves as Flight Attendants because they offer a good price and better service than their competition.

2) While airlines have been making record products, they are also twice as large as they were ten years ago. Divide the profits in half and I don’t think people would bemoan that they are greedy as much.

3) This article is unreadable and I tried to read it. Flying has never been safer. No US airline has had a crash since 2009 and no US mainline airline has had a crash since 2001. The cause of both those crashes was pilot error, not maintenance. The FAA still has oversight no matter where the maintenance occurs.

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1. Kilroy
  
  Nov 13, 2015 at 7:44 pm
  
  I was going to mention the crash issue. As much as the media likes to get eyeballs by scaring people, US commercial aviation is heavily regulated, very safe, and for good reason.
  
  Reply
Oliver

Nov 13, 2015 at 7:56 am

Ouch! Hope that dental work went well… on Friday the 13th ;)

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Terry Kozma

Nov 13, 2015 at 8:55 am

The same Delta that wants government help on issues. Do
not expect favorable rulings with this type of disloyal behavior

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Nick Barnard

Nov 13, 2015 at 3:57 pm

The VF article reminds me that the plural of anecdote is not data.

I’m sure any competent reporter could come up with a similar list of US maintenance shops that have made the same mistake.

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iahphx

Nov 17, 2015 at 5:30 pm

That priceonomics article might have present a plausible theory if it were written a few years ago. But now it seems a bit ridiculous — like the author forgot to notice what’s going on in the world now. Once the mergers occurred, the USA airlines became highly profitable. And then oil fell, and they became absurdly profitable. There’s nothing on the horizon to change this reality. The real question at airlines like American is whether profits will dip — or share prices rise — before the company is able to rebuy all its stock because it trades at such a low multiple to earnings.

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