Why Delta, With Huge Profits, Won't Pay Taxes for Years

[700UW]

http://www.bloomberg.com/bw/articles/2014-01-21/why-delta-with-huge-profits-wont-pay-taxes-for-years

 

Delta Air Lines (DAL) earned $2.7 billion last year but paid no income taxes because of the big losses it posted in 2008 and 2009, totaling nearly $2 billion, and that’s just a small chunk of the total past losses the company can use to defray future earnings. The third-largest U.S. airline is sitting on more than $15 billion in what are called net operating loss carry forwards, an accounting device that lets a company apply past financial losses to future tax bills. Under accounting rules, corporations are required to value their deferred tax assets based on the performance of their business and tax rates.
 
Delta reported fourth-quarter earnings of $558 million on Tuesday and reversed the value of its deferred tax assets, booking an $8 billion noncash gain to end 2013. Valuing a corporate tax benefit into the future is a tricky accounting exercise, but Delta calculated that its $15 billion in losses equate to an $8 billion benefit to offset future taxes, airline spokesman Trebor Banstetter said. “I would anticipate that there’ll be some adjustments to it” over time, he says. The airline said today that it will begin booking taxes at a 39 percent rate, but that expense will be only on paper and won’t require any cash outlay.
 

 

 

[WorldTraveler]

I presume you realize the article you cited is 1 1/2 years old and that based on DL's profits they are a lot closer to using up their tax benefits than they were at the time the article was written.


The same thing can be said for just about every other company that was in BK including airlines.

and it is an advantage that the legacy carriers have over LCCs.

it is part of the process, is no different for AA or UA, and won't be changed for airlines unless it is also changed for other industries.

Short of a complete overhaul of the US tax code, nothing is likely to change.

 

[robbedagain]

that's flat out ridiculous that they don't have to pay taxes    un-freaking-believable

 

[WorldTraveler]

you are clueless, robbed.

AA didn't pay taxes and neither did UA.

that is what BK does and DL is being treated no differently than other legacies that went thru BK.

 

[townpete]

Oh my, all the crocodile tears, poor snowflakes....
 
Is DAL doing something illegal?
 
No
 
Its called the "tax code" and perfectly legal.
 
Get over it.

 

[robbedagain]

you both are truly clueless   how come the average American taxpayers cannot get those kinds of breaks    go get help

 

[WorldTraveler]

because that is the way the tax code is set up, robbed. We are not clueless at all.

The issue of taxes isn't just about DL.

And there are deductions that individuals can take that all but eliminate their taxes as well - and it isn't just about rich people. There are plenty of average Americans who don't pay taxes... do the research and you will find out the reasons.

The tax system in the US is not fair - but what the legacy airlines are doing is no different from what other industries have done.

and it is legal.

 

[robbedagain]

just like how the airlines do not have to report teh hefty money their making on the a la carte fees such as bag fees   personally its just flat out wrong

 

[WorldTraveler]

except they do report that information, robbed. It's readily available from the DOT.

 

[FWAAA]

just like how the airlines do not have to report teh hefty money their making on the a la carte fees such as bag fees   personally its just flat out wrong

I'm not sure what you mean by "do not have to report" the ala carte fees. All airline revenue must be "reported" for accounting purposes and for income tax purposes. Perhaps you're referring to the absence of excise tax on the ancillary revenues?

 

[robbedagain]

yes FWAA  that's what I meant   my apologizes there bro  I meant to say ancillary revenues 

 

[WorldTraveler]

it still is wrong...

Airlines report to the DOT the baggage and reservation change fees that they collect and the info is available here.

https://www.rita.dot.gov/bts/sites/rita.dot.gov.bts/files/subject_areas/airline_information/baggage_fees/index.html

Airlines do not report charges like premium seats or onboard sales and it is doubtful they could be forced to do so.. and even if they did, the ULCCs would be the ones that would be most negatively impacted.

and they still pay taxes on all of it.

It is only because Congress created such an atrocious tax system that ancillary, baggage, and res change fees are taxed at a lower rate than basic air transportation.