December 1 - Kudos to American, United for abandoning Delta's dangerous tax code scheme


Business Travel Coalition

INDUSTRY ANALYSIS


Kudos to American and United for abandoning Delta on its dangerous tax code scheme


By Kevin Mitchell

For nearly three years Delta Air Lines, American Airlines and United Airlines (Big 3) have stood shoulder-to-shoulder in their political campaign urging the US government to abandon Open Skies and thereby restrict US flights by Emirates Airline, Etihad Airways and Qatar Airways (Gulf Carriers). 

At times American and United were rumored to have cringed. For instance, neither joined then Delta CEO Richard Anderson in despicably playing the anti-Muslim race card by injecting the 9/11 tragedy into the debate. Moreover, both distanced themselves from blatant race baiting by Fair Skies, a Delta-funded lobbying group, when it released cartoons insensitively mocking Muslim stereotypes. Disappointingly, neither condemned Delta but they kept their distance.

But, otherwise, the three have been shoulder-to-shoulder oligopolists on a mission to restrict competition and further swell record setting profits. That is, up to now.

Delta, with the assistance of home state Senator Johnny Isakson, succeeded in sneaking a special interest, pork provision into the Senate tax reform bill. They were aided in this effort by Senate Finance Committee Chairman Orin Hatch, who represents Delta’s Salt Lake City hub. The provision would put the US in violation of bilateral reciprocal tax exemption agreements with at least 14 countries and territories, including some of our most important geopolitical allies including Saudi Arabia, the United Arab Emirates and Jordan. Specifically, the Isakson provision would, on a selective and targeted basis, subject carriers from these 14 countries and territories, to US taxation for income earned on US flight operations. 

The provision has been universally criticized as bad and dangerous public policy. For instance, the International Air Transport Association (IATA), which represents over 200 airlines around the world including Delta, has warned it would set a precedent that could have disastrous consequences for global airlines, including boomeranging against Delta and US carriers should other countries follow the roadmap Delta and Senator Isakson are drawing for them. Specifically, IATA made this chilling warning: “if enacted, (the Isakson provision) would upend long-established U.S. policy and decades of international precedent on the taxation of international aviation – to the detriment of U.S. airlines, their customers, and global aviation generally.”

While Delta is fighting feverishly to keep the Isakson provision in the Senate tax reform bill, both American and United are conspicuously absent. Why?

American and United joined the Delta-initiated campaign because they are competitively opportunistic. They saw an opportunity to try to eliminate competition by Gulf Carriers and found it too irresistible not to join. Delta, however, is different.

For Delta, the campaign against Gulf Carriers is a blood sport. It is about winning, and winning at all costs. The fact that the Isakson provision, if enacted, would harm global aviation – and, in fact, could backlash against Delta and its SkyTeam alliance and other joint venture partners – is irrelevant. The fact the provision targets Delta partner, Saudia from Saudi Arabia, is immaterial to them. 

This is about Delta’s obsession to seek competitive retribution against the Gulf Carriers, even it puts the US in breach of international obligations, puts global aviation at risk as IATA has warned and is clearly harmful to consumers and competitive choice.

That Delta would be so blinded by its perceived need to harm Gulf Carriers, and accordingly, would stoop to such harmful tactics should surprise no one. According to a February 9, 2017 article in the Seattle Times, Delta delayed an Emirates flight – and inconvenienced hundreds of Emirates passengers, including many who missed connections – by refusing to lend Emirates a $300 replacement part. Talk about petty and anti-passenger behavior! It is standard airline industry practice to help one another with spare parts. But, according to the Seattle Times, in this case, Delta directed the already installed $300 part to be removed from Emirates’ Boeing 777 aircraft on orders from Delta headquarters. It eventually had to source the part from Alaska Airlines instead.

The Emirates statement to the Seattle Times in response hit the nail squarely on the head: “It is sad, in our view, that any airline would deny such standard technical assistance to another carrier based on orders from headquarters that had nothing to do with maintenance or cost, but seem clearly to have been intended to inflict harm on the airline and its customers.”

The Isakson provision is yet another sad display by Delta to attempt to feed its obsession to harm Gulf Carriers and eliminate the important competitive choice they offer to passengers. Let’s hope that Congress joins American and United in saying enough is enough: the US should not (1) breach international agreements, (2) put our airlines and other companies that do business abroad on the dangerously slippery slope the Isakson provision would create and (3) ignore IATA’s sobering warning simply to coddle Delta’s unhealthy obsession. America first, not Delta Air Lines.

©2001 to 2018 Business Travel Coalition, Inc..