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Analysis: US suffrage debates fuel brawl over airline tax breaks

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CHICAGO (Reuters) – Airlines are bracing for the challenge of the tax breaks they receive from U.S. states as a result of participating in a political debate over voting rights, rekindling a national standoff between politics and profits.

FILE PHOTO: Protesters gather outside the Georgia State Capitol to protest against HB 531, which would impose tighter restrictions on voting in Georgia, in Atlanta, Georgia, US, 4 March 2021. Georgia adopted the restrictions on March 25. REUTERS / Dustin Chambers / File Photo

A Republican backlash that Delta Air Lines faced in its home state of Georgia after calling the new restrictions unacceptable is spreading to Texas as some companies clash with Republican lawmakers.

Democrats say the stricter regulations are undemocratic and will hurt black voters in particular.

American Airlines and United Airlines have spoken out against measures that restrict access to voting, prompting a furious backlash from Republicans who claim bills against fraud.

After Delta blasted Georgia’s Republican-backed voting bill last week, some lawmakers tried to end its jet fuel tax breaks.

Airlines now fear tax breaks that allow them to cut fuel costs could be singled out by Texas lawmakers in retaliation for their opposition to the new election laws, people familiar with their thinking said.

We have an eye on this as a possibility and I think it goes without saying that we wouldn’t like it, one person said, asking not to be identified.

Texas Lieutenant Governor Dan Patrick tore up companies for opposing the bill on Tuesday and accused the U.S. chief executive of not reading it, which the airline denied.

The clashes have shed new light on the reliance of some U.S. carriers on state tax breaks to reduce their fuel costs, with airlines the second-largest spending after labor and weighing on costs. slim profit margins.

There is one thing you consume a lot in the airline industry and that is fuel, said US analyst Bob Mann.

So they spend a lot of time trying to avoid taxes or eliminate taxes where they can. It is a competitive weapon.

Airport and fuel costs can influence airline decisions about where to add flights, and most states really want more air service, not less, said an executive at a small U.S. airline.

RECURRING THREATS

This isn’t the first time airlines have seen tax breaks come under the microscope after becoming involved in political matters.

In 2018, Georgia temporarily revoked a tax exemption after Delta ended its relationship with the National Rifle Association following a school shooting in Parkland, Florida.

The exemption would have saved Delta $ 40 million a year, a small amount compared to its total fuel bill of $ 9 billion, but enough to impact marginal roads. Eventually he won the tax break.

Delta is Georgia’s largest employer and its Atlanta hub generates significant revenue for the state.

North Carolina threatened to repeal a fuel tax exemption for American Airlines, with a hub in Charlotte, after opposing a state transgender bathroom law, but ultimately backed down .

As hot national issues have gained momentum after the Trump presidency, business calculations are shifting.

Executives at major U.S. airlines have decided it is increasingly important to take decisive positions on issues such as civil rights to protect their brands and appease employees and customers, the sources said.

For now, that overshadows concerns about whether these decisions could jeopardize things like tax breaks, they added.

Prolonged attention to tax breaks, however, could reopen injuries between US carriers and their rivals over what constitutes unfair aid.

In 2015, Delta, American and United – the so-called Big 3 – accused Gulf airlines of receiving $ 42 billion in government subsidies, including fuel hedging concessions and tax policies.

Emirates, Qatar Airways and Etihad dismissed the complaint, saying the US carriers themselves had received support.

Airlines are not immune to two-headed behavior. They speak out against government involvement in anything until it’s something that benefits them, how much they’re all for, Mann said.

US airline industry sources have dismissed any comparison to the Gulf trade dispute.

Talking about state-subsidized airlines versus certain tax exemptions is very different in size and scope than whether or not a particular state chooses to tax kerosene, one said.

U.S. airlines have struggled to act in unison on the earlier trade dispute or the recent domestic political conflict.

This adds a layer of complexity in Texas, where analysts say it would be difficult for lawmakers to punish the Big 3 without also harming Southwest Airlines Co, which did not directly oppose the ballot bills.

The Southwest’s biggest imperative right now is to win customers and survive the pandemic without alienating 50% of the population, said a person familiar with his thinking.

Reporting by Tracy Rucinski in Chicago; Additional reporting by David Shepardson in Washington; Editing by Tim Hepher and Matthew Lewis

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