3 Links I Love: A Political Bonus Thanks to Tax Reform, A 747 Wedding

American, Delta, Links I Love, Southwest

This week’s TWO featured links:
Southwest Airlines Rings In The New Year Under Tax Reform With Employee Bonus, Charitable Contribution, And Further Investment In Its Boeing FleetSouthwest Newsroom
American Airlines to Distribute $1,000 to Each Team MemberAmerican Airlines Newsroom
With the new tax plan lowering tax rates on corporations, it seems companies feel the need to publicly bow down and show their thanks to the administration. So far, it’s Southwest and American doing the fawning.

For American, there are no actual savings yet, but the airline is giving money away. American hasn’t paid taxes in years thanks to all the losses it rolled up before bankruptcy. Those losses continue to carry over, so American won’t have to pay tax until there are no more losses available to offset profits. But that won’t stop the airline from giving a $1,000 bonus to celebrate the lower tax rate that will, presumably, have an impact on the airline when it does eventually start paying taxes again. But since it’s a one-time bonus, it’s more about optics than sharing actual cash savings.

Over at Southwest, the airline definitely pays taxes, so the savings are real. Employees will get a $1,000 bonus to celebrate that. But Southwest also took the opportunity to claim that tax reform allowed it to order more airplanes. In reality, Southwest is really spinning what is mostly an order modification that pushes the 737 MAX 7 one step closer to its grave. See, Southwest exercised an option for 40 737 MAX 8 aircraft to come in 2019 and 2020. But that move was partially offset by the airline’s decision to defer 23 MAX 7 aircraft all the way out until 2023/2024. That’s not good news for the MAX 7 which has very few orders as is. I can’t help but assume this deal would have happened anyway regardless of tax reform.

Delta, for what it’s worth, appears to be bucking the trend and won’t be giving bonuses. It does mention, however, that if profits go up, then profit-sharing goes up. That’s the right way to do this.

And now JetBlue appears to be joining the trend of paying up. I hear Alaska is doing the same.

One for the road:
Midair vows: Pilot marries flight attendant on last Delta 747 flight to Marana, ArizonaArizona Republic
Did I say I was done with 747 tributes. I lied. On Wednesday, Delta finished up its football charter work and flew the last 747 to the desert for good. A couple journalists were onboard to document it, and they were able to witness a wedding in the process.

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16 comments on “3 Links I Love: A Political Bonus Thanks to Tax Reform, A 747 Wedding

  1. I wonder how many employees would rather have some positive space passes given to them and not $1,000. I know when I worked for an airline I would have liked positive space passes given to me.

    1. Nope, show me the money. No mention of united in there cranky.

      Does united still get to offset losses?? It would be wise to announce an increase in the profit sharing due to the tax break.

      Also cranky do you know if any airlines are repatriating any money stashed overseas??

      1. Joey – Yes, United still offsets losses I believe.

        I also don’t think there is significant money overseas to repatriate.
        (Except in Venezuela, but that’s only because they won’t let them…) There have always been plenty of ways to use that money domestically without paying tax on it.

  2. So a corporation gets to rack up losses, declare bankruptcy when they still have plenty of assets to cover their liabilities (ie aren’t in imminent danger of anything like liquidation) to selectively rid itself of the obligations it doesn’t like (eg offload pension obligations to the taxpayers, get rid of pilot work rules and scope clauses it doesn’t like, leave bondholders up the creek), yet they still get to keep the losses from pre-bankruptcy years on the books to get out of tax obligations? Well, it’s a good thing tax reform has cleaned up our tax code. Or not.

    My rule: if a corporation wants to use America’s incredibly corporate-friendly Chapter 11 rules, they should also be freed of any past losses for getting out of future corporate income tax obligations. But that’s just me.

    1. Chapter 11 rules in the US of A are ridiculous. The “so-called” legacy carries should all be gone and dead from bad business yet the taxpayers via law give them a pass with our asinine bankruptcy laws. Of course airlines the globe over are propped up by their respective countries so its par for the course but I still think bad businesses should fail.

      Now all that said I’m all for the airlines giving their employees more take home pay. Using the tax bill as an excuse is fine and well. I work for a small business and that tax bill has us pretty stoked about some real tax savings in 2018. Of course nothing is realized yet but good on the airlines for passing on some of the gravy.

      1. Yep. That’s just as much a subsidy as the ME3 are accused of. Being able to wipe debts without a corresponding cost enables cheaper tickets.

  3. Those tax reductions are going to be very short lived. Now that the federal government will be down a couple trillion in funding over the next decade the Trump administration is already planning fairly significant budget cuts, including USDOT-FAA and TSA. The separately proposed but not passed trillion dollar infrastructure plan as it stands today does not provide funds for airports and is primarily geared towards veterans hospitals, energy infrastructure, and residential/commercial developments.

    As a result states, municipalities, and ports are going to need to find a way to plug the billions in gaps from decreasing federal funds which will almost certainly result in higher landing fees.

    So instead of not paying federal taxes, American will likely be paying more landing fees as a result of the tax plan and it will be a wash for Southwest.

  4. Good Heavens, is that what that noise was! I live in Marana, Arizona. We are generally off the main flying routes for Tucson. We get the occasional helicopter, small private planes, and military trainers from the National Guard airbase (also the location of the boneyard where no doubt the Delta now rests). A couple of days ago there was a major sustained noise overhead, totally foreign to any of the usuals. Now I know what it must have been! (BTW, cafe at the Marana airport serves great breakfasts!)

  5. Love the idea of a wedding on the last Delta 747 flight.

    Shame the happy couple wasn’t able to reserve the crew rest lounge for the rest of the flight after the wedding. ;-)

  6. Don’t worry Southeastern, tax cuts always yield more revenue to the US Treasury. The airlines are giving bonuses (probably taxable income), they are investing in more planes, giving more charitable donations (could offset the need for those charities to rely on government programs), other companies have proposed increased capital spending also, and the economy is starting to ‘take-off’. Hang on for the ride!

    1. LOL. There is no evidence that tax cuts result in more revenue to the Treasury. Quite the opposite.

      1. Yes, quite a lot of evidence that tax cuts yield increased revenue to US Treasury. Google ‘revenue to us federal government’ and let’s just take the 80’s under Reagan. Big tax cuts and you’ll see that revenue in 1980 was $517 billion and in 1988 it was over $900 billion. There were also budget deficits too but revenue obviously wasn’t the problem. I could also show you the 90’s and 2000’s and those tax cuts also yielded more revenue, not less. Plenty of evidence.

        1. Outright false. First of all, you’re citing total tax revenue, not revenue as a percentage of GDP (the relevant number). See, for example, the Wikipedia article on supply-side economics. The consensus of economists is that tax rate cuts have historically produced economic benefits that regain about 1/3 of the revenue which would be lost due to the rate cuts without the economic benefits.

          Also remember that taxes went up multiple times under Reagan as well. See the table in the Wikipedia article on the Tax Equity and Fiscal Responsibility Act of 1982 (citing a February 2013 Treasury report: https://www.treasury.gov/resource-center/tax-policy/tax-analysis/Documents/WP81-Table2013.pdf). The 1981 Reagan tax cuts led to a reduction in tax revenue of 4.19% of GDP in year 4. That’s enormous.

          The 2001 Bush tax cuts led to a reduction in tax revenue of 0.89% of GDP in year 4.

    2. Hey Trumpboy, just wait until this one shot from your man is over. This whole tax reform is a farce and a giveaway to the Richy Riches of the world. Your kids are going to pay for this big time down the road.

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