House Gives Delta $28 Million Credit

[Paul]

Delta Air Lines would get the chance to recapture $28 million in "trapped" tax credits under legislation that won unanimous approval Wednesday in the Georgia House.

The bankrupt airline earned the credits by retraining employees for jobs that otherwise would have gone out of state, but was unable to collect them because of an "oversight" in the way earlier legislation was written, said Mark Burkhalter, the House's second-ranking Republican.

It's the second tax break aimed at helping the struggling airline that the Republican-controlled House has endorsed.

Last year, lawmakers approved a measure that put a $13 million annual limit on what airlines must pay in state fuel taxes. Delta, the only airline believed to buy enough fuel to benefit from the tax break, paid the state $17 million in fuel taxes in 2004.

The latest proposal, which now moves to the Senate, prompted concerns from AirTran Airways, which employs roughly 5,000 workers in Georgia.

"We believe in a free market," said Tad Hutcheson, the airline's vice president of marketing and sales. "But if there is government intervention, we believe that the intervention should be available for all players, not just one."

WXIA

 

[Ch. 12]

FL should look to Florida's gov't if they want tax breaks. Having hub revenue and having hub + HDQ revenue are two totally different animals and FL's "contribution" is not as significant as they wish to make the public believe.

 

[PhxMama]

Delta Air Lines would get the chance to recapture $28 million in "trapped" tax credits under legislation that won unanimous approval Wednesday in the Georgia House.

The bankrupt airline earned the credits by retraining employees for jobs that otherwise would have gone out of state, but was unable to collect them because of an "oversight" in the way earlier legislation was written, said Mark Burkhalter, the House's second-ranking Republican.

It's the second tax break aimed at helping the struggling airline that the Republican-controlled House has endorsed.

Last year, lawmakers approved a measure that put a $13 million annual limit on what airlines must pay in state fuel taxes. Delta, the only airline believed to buy enough fuel to benefit from the tax break, paid the state $17 million in fuel taxes in 2004.

The latest proposal, which now moves to the Senate, prompted concerns from AirTran Airways, which employs roughly 5,000 workers in Georgia.

"We believe in a free market," said Tad Hutcheson, the airline's vice president of marketing and sales. "But if there is government intervention, we believe that the intervention should be available for all players, not just one."

WXIA

Does this mean they are trying not to ask the pilots for more pay cuts? If so, why wouldnt they exhaust all avenues before asking any employee for concessions?

 

[Flying Titan]

FL should look to Florida's gov't if they want tax breaks. Having hub revenue and having hub + HDQ revenue are two totally different animals and FL's "contribution" is not as significant as they wish to make the public believe.

It is if you're "the public." Do you think there are any routes out of ATL where AirTran flies that the public has not benefitted from lower fares, added frequencies, and a better overall level of service?

 

[Ch. 12]

It is if you're "the public." Do you think there are any routes out of ATL where AirTran flies that the public has not benefitted from lower fares, added frequencies, and a better overall level of service?

When it comes down to it, it is tax dollars. DL is paying $$$$$$$$ to Georgia and FL is paying $$. The quantifiable answer is still that DL is a much bigger player in the Georgia economy than is FL. In fact...cheaper airfare at loss-leader fares is not necessarily a boon to the economy in Georgia...especially when it is resulting in the loss of several thousand jobs. FL has added their own jobs but at the greater cost of DL's jobs so I would almost argue that from a tax revenue and state economy perspective, FL has been a detriment to the state. As a legislature, would I want to give $$ to an out-of-state company that pays taxes elsewhere and is draining the local economy? I don't think so.

 

[QA4Jet-A]

When it comes down to it, it is tax dollars. DL is paying $$$$$$$$ to Georgia and FL is paying $$. The quantifiable answer is still that DL is a much bigger player in the Georgia economy than is FL. In fact...cheaper airfare at loss-leader fares is not necessarily a boon to the economy in Georgia...especially when it is resulting in the loss of several thousand jobs. FL has added their own jobs but at the greater cost of DL's jobs so I would almost argue that from a tax revenue and state economy perspective, FL has been a detriment to the state. As a legislature, would I want to give $$ to an out-of-state company that pays taxes elsewhere and is draining the local economy? I don't think so.

I will tread lightly here as I can see this becoming very arguementive. My comments are only to make a comment or three, and keep in mind, I don't claim to be the brightest bulb in the chandeliere. True, DL does have a much bigger impact on taxes but by the same token, it is blowing tax incentives as it bleeds $$$. That in itself makes me wonder why. You make it sound as if FL is the cause of, "especially when it is resulting in the loss
of several thousand jobs. FL has added their own jobs but at the greater cost of DL's jobs so I would almost argue that from a tax revenue and state economy perspective, FL has been a detriment to the state". I understand your point but, what is the real reason DL jobs are being lost? Seems your Management has recognized some waste and is cutting it. I will not go into management tiering and all that but I do believe a re-structuring is in order at DL. Competition is what it is and Free Enterprize as well.If it wasn't FL, it could be B6 or WN... etc. The thought is, the Business Model needs repair. Tax breaks are not going to save DL. I believe FL's feeling is, we are there too and we want a respective recognition. Not the same amount, just a break relative to monies brought in. Florida and Georgia have different tax guidelines. I'm sure JL would like to move the "Cert" to GA if he thought he could get a fair shake. As a legislature, would I want to give $$ to an out-of-state company that pays taxes elsewhere and is draining the local economy? Please explain how FL is draining the local economy? FL DOES pay taxes owed to GA in relation to Business size. FL has added growth to the area, brought more jobs in, given people the opportunity to fly at a rate they can afford. FL is not responsible for DL's inability to sustain it's employee structure b/c of a fractured Business Model. IMHO, this industry is evolving, as you well know, and the BIG players need to "stop the bleeding". Perhaps, as DL is gradually doing, move more towards Int'L routes and less Domestic. Leave the Domestic routes for the LCC's to battle. In closing, if I may ask, should FL move their Cert to ATL, in your opinion, would you agree that FL deserves any tax break in relation to size, compared to DL, or is it "only DL deserves this because of.....?

 

[Flying Titan]

Well said.

 

[flyhigh]

...the reality is that FL benefits plenty from government subsidies that others don't get (see service to Witchita & Bloomington). Shouldn't cities who pay for a carrier to enter a market to decrease fares be forced to provide that subsidy to all carriers serving the market? They don't, so why should GA taxes be funneled to a company that pays largely out of state taxes. In addition, it seems that the way this is written, while it solely benefits DL now, it could eventually benefit FL...they just have to buy more fuel...$13 million worth.

 

[Ch. 12]

QA4Jet-A-

First let me just say that flyhigh presented a VERY valid point about FL and its many breaks through revenue guarantees at a plethora of the cities it serves. FL is enjoying guaranteed profitability on routes where other carriers have to earn profitability. Is that fair?

Back to our discussion...I would absolutely welcome tax breaks for FL if it were paying its taxes in GA and not FL. As FL currently only claims to have 250 people at HDQ, I don't know as though they would realistically move to GA b/c it just seems that the costs would outweigh the benefits. Why doesn't FL petition FL (ok...guess using the airline code and state abbrev won't work too well!!) for breaks rather than GA? Airtran is just looking for free marketing right now and they are getting it. Pretty smart, if you ask me.

As far as FL and its drain on the Georgia economy...you need to look at the big picture. If you just look at FL, sure they are adding jobs in Georgia and they are offering somewhat low fares on their routes. But at what expense? DL is hemmoraging b/c there is way too much capacity out there (that has been added by LCCs such as FL...our previous discussion) and DL frankly has a horrible cost structure and an out-of-date legacy business plan. Due to the increased competition, DL's vulnerabilities have been exposed and they are now cutting wages for its staff of thousands in GA (and elsewhere) and reducing jobs by approx 7-10 thousand...on top of higher-than-normal attrition. I'm not saying that I feel bad for the DL situation (other than I am in the middle of it) b/c there were some poor decisions in the past and legacies are also not able to easily change structure to an LCC-type operation but I AM saying that it is negative to the GA economy. So I'm not saying what is right or wrong but I am saying that cause and effect has caused GA to lose jobs, have a reduction in earnings, and ultimately have a negative impact on the economy. FL adding flights into less than 20% of DL's markets while funneling profits through the state of Florida doesn't help GA enough to make up for the DL downturn. So when you net it, in the end GA is worse for the wear. Just my simple observation...and again...I'm not saying that anything is right or wrong...just how it is playing out.

So why not offer FL huge incentives/breaks in GA? Look at it (GA gov't) as a business. You have one unit (Airtran) that is overperforming but is canibalizing another, far larger unit (Delta). At the same time, the smaller units profits are going mostly to a separate holding company and not the corporation itself. As a business, I would want to get my large unit back to operating efficiently and would throw $$ at it. I would not be so inclined to feed the smaller unit, especially since it seems to be doing fine without a cash influx AND especially since the company itself doesn't benefit nearly as much from the unit. The highest potential benefit will still come from DL...even if FL would move HDQ to GA.

 

[QA4Jet-A]

QA4Jet-A-

First let me just say that flyhigh presented a VERY valid point about FL and its many breaks through revenue guarantees at a plethora of the cities it serves. FL is enjoying guaranteed profitability on routes where other carriers have to earn profitability. Is that fair?

Back to our discussion...I would absolutely welcome tax breaks for FL if it were paying its taxes in GA and not FL. As FL currently only claims to have 250 people at HDQ, I don't know as though they would realistically move to GA b/c it just seems that the costs would outweigh the benefits. Why doesn't FL petition FL (ok...guess using the airline code and state abbrev won't work too well!!) for breaks rather than GA? Airtran is just looking for free marketing right now and they are getting it. Pretty smart, if you ask me.

As far as FL and its drain on the Georgia economy...you need to look at the big picture. If you just look at FL, sure they are adding jobs in Georgia and they are offering somewhat low fares on their routes. But at what expense? DL is hemmoraging b/c there is way too much capacity out there (that has been added by LCCs such as FL...our previous discussion) and DL frankly has a horrible cost structure and an out-of-date legacy business plan. Due to the increased competition, DL's vulnerabilities have been exposed and they are now cutting wages for its staff of thousands in GA (and elsewhere) and reducing jobs by approx 7-10 thousand...on top of higher-than-normal attrition. I'm not saying that I feel bad for the DL situation (other than I am in the middle of it) b/c there were some poor decisions in the past and legacies are also not able to easily change structure to an LCC-type operation but I AM saying that it is negative to the GA economy. So I'm not saying what is right or wrong but I am saying that cause and effect has caused GA to lose jobs, have a reduction in earnings, and ultimately have a negative impact on the economy. FL adding flights into less than 20% of DL's markets while funneling profits through the state of Florida doesn't help GA enough to make up for the DL downturn. So when you net it, in the end GA is worse for the wear. Just my simple observation...and again...I'm not saying that anything is right or wrong...just how it is playing out.

So why not offer FL huge incentives/breaks in GA? Look at it (GA gov't) as a business. You have one unit (Airtran) that is overperforming but is canibalizing another, far larger unit (Delta). At the same time, the smaller units profits are going mostly to a separate holding company and not the corporation itself. As a business, I would want to get my large unit back to operating efficiently and would throw $$ at it. I would not be so inclined to feed the smaller unit, especially since it seems to be doing fine without a cash influx AND especially since the company itself doesn't benefit nearly as much from the unit. The highest potential benefit will still come from DL...even if FL would move HDQ to GA.

First of all... please tell me of this "Plethora of Cities." Name them, FL only flies to 50 starting soon, not yet. If I read correctly, you even said...Airtran is just looking for free marketing right now and they are getting it. Pretty smart, if you ask me. I have to agree with you on that.. It is smart and it is working as little as it applies in some cases, FWIH. I don't work on that end of the House so that was sincere speculation and H20 talk. We may be losing our Boxers.???? IMHO, FL is doing what they feel works or at least trying. I don't want to get into a debate on what will make DL work, I just hope you all do. Competition is healthy! You are very keen in your post as to where DL stands and I respect your thoughts in it's direction, or need. I do however, have to quiz you on a statement above...So why not offer FL huge incentives/breaks in GA? Look at it (GA gov't) as a business. You have one unit (Airtran) that is overperforming but is canibalizing another, far larger unit (Delta). My question is, Why should a Company, already in BK, get further assistance, than a Company that is profitable, get none? Because the Cert is in another State, but most of it's activity is in GA? Trust me.... Corporate/Orlando would be hard to find 200 people, much less, 250 on a busy day. The Certificate is the question here, where it is. Yes, it resides in MCO till the Higher Powers decide different, but the fact remains, most employment is in GA. In closing... Chapter 12, you are a delight to post with and I look forward to further "verbal arm wrestling". The same goes for "FlyHigh". Thank you folks....