Southwest, American to Pay Bonuses After Tax Bill

And also order more planes
By Newser Editors and Wire Services
Posted Jan 3, 2018 2:45 PM CST
In this Aug. 26, 2016 file photo, a Southwest Airlines jet makes its approach to Dallas Love Field airport, in Dallas.   (AP Photo/Tony Gutierrez, File)

(Newser) – Airlines are sharing some of their tax-law windfall with employees and Boeing, the AP reports. American and Southwest said Tuesday that they will pay employees bonuses of $1,000 each, a gesture that American said would cost $130 million. Southwest also said that it exercised options to buy more new jets from Boeing while delaying orders for some others. Unlike most other US airlines, Dallas-based Southwest has long been profitable and already pays cash income taxes. It earned $1.6 billion in the first nine months of 2017, and will benefit immediately from the lower rate on corporate income in the tax bill that President Trump signed last month. Southwest said it expects to record a non-cash credit of between $1 billion and $1.5 billion in the fourth quarter to reflect the difference in rates between the time the tax expenses were accrued and when they will be paid.

Because of huge losses in previous years, other major US carriers do not pay cash income taxes even though they have become hugely profitable. American, for instance, earned $1.7 billion in the first nine months of last year. All the airlines should benefit, however, from a provision in the new law that lets businesses more quickly depreciate the cost of investments—aircraft, in their case. CEO Doug Parker and President Robert Isom said the new tax law will help American in the long run, presumably when it can no longer avoid income taxes by counting past losses. They said the tax changes will give the company more confidence to invest in planes and facilities and pay the employee bonuses. American said employees at the main airline and its regional affiliates would get their money in the first quarter. Southwest said it will make payments next Monday.


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