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As politicians politic; Delta saves $40 million
Delta Air Lines is poised to receive a $40 million fuel tax credit in its Atlanta, Georgia hub thanks to some political wrangling. Governor Deal suspended collection of the state's aviation fuel tax unilaterally after the legislature failed to do the same during its now ended annual session. It was poised to repeal the tax but other politics got in the way.
When Delta killed a little-used corporate discount for NRA members to travel to the group's annual convention a significant backlash arose. With multiple threats to ensure that the cut – which affects all airlines in the state but clearly impacts Delta the most – never made it through the legislature it died before coming to a vote.
The Governor's move is a temporary one. When the legislature reconvenes in 2019 it will decide whether to keep the tax suspended or reimpose the fee.
The $40 million in savings is significant, of course, but with an anticipated 2018 fuel budget around $8 billion it is, in many ways, just a drop in the bucket. CEO Ed Bastian suggests that "The savings will allow us to invest additional flights into Georgia in the years to come," though that promise remains incredibly vague. And those investments were likely to come anyways given the carrier's massive hub in Atlanta. Even the new Mumbai service was rumored to favor Atlanta over New York's JFK airport well before this deal was announced.
Read More: Delta hits a $40mm NRA speed bump in Georgia
On the political side, Georgia faces a contentious Gubernatorial election this year and this tax cut – and its commentary on the second amendment – may prove a key issue. Not because the state needs the $40 million (though it probably would use it better than Delta) but because Republican candidate Brian Kemp spoke strongly against the cut, right up until it was formally put in place by Governor Deal.
back in February Lieutenant Governor Casey Cagle promised to kill any efforts to cut the tax, part of his campaign to be the Republican nominee for Governor in this year's election.
I will kill any tax legislation that benefits @Delta unless the company changes its position and fully reinstates its relationship with @NRA. Corporations cannot attack conservatives and expect us not to fight back.
— Casey Cagle (@CaseyCagle) February 26, 2018
Cagle lost in a tight runoff with Kemp, however, slightly changing the landscape. But really only slightly.
Kemp campaigned earlier this year more aggressively on the issue than Cagle. Kemp called Delta a "corporate coward" and suggested that Cagle's public opposition was a precursor to shenanigans that would see the tax cut approved anyways. Being right is nice, of course, but Kemp also changed his tune. Today, Deal's suspension of the tax is seen as a "wise" move by Kemp and good for the economy. And good for Kemp's political ambitions, at least with the more moderate voter bloc he'll need to win.
And, all the while, Delta and the other airlines will smile and continue to profit.
It is not often that a senior airline executive departs that role, and even less often that the news is semi-buried in a press release. Which makes what comes next for Scott Laurence, formerly Head of Revenue and Planning at JetBlue, all that much more interesting.
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