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Airlines Again Ask State for Tax Break

Posted on: Thursday, 4 August 2005, 18:00 CDT

Faced with rising fuel costs, stiff competition and high debt loads, major airlines in Salt Lake City are once again looking for state tax cuts.

In early September airline representatives from Delta Air Lines, Southwest Airlines and other Salt Lake carriers will be testifying before the state's Tax Reform Task Force to determine what, if any, further tax cuts could help sustain the industry.

While controversial four years ago, this time the tax cut discourse looks to be more cordial. Back then talk surfaced of Delta abandoning its Utah hub if it wasn't given tax concessions.

Utah Air Travel Commission chairwoman Meg Holbrook said she has been meeting with Senate President John Valentine, R-Orem, and House Speaker Greg Curtis, R-Sandy, about considering lower taxes for airlines, and the legislative leaders seem cordial.

"My whole thing is just to advocate, 'Yes, we need tax breaks,' " Holbrook said.

She has also been in contact with Sen. Curtis Bramble, R-Provo, who is co-chairman of the task force and said he invited the airlines to offer ideas on how the state could lessen their tax burden.

"If there is something we can do to affirmatively help Delta I think we should, at least we should discuss it," Bramble said.

Delta, which accounts for roughly 80 percent of flights into and out of Salt Lake City, hit an all-time low this week as its stock hovered around $2.50 a share. Delta leaders have continually said high fuel prices and large debt may force them into bankruptcy, and many have speculated the carrier will file for bankruptcy this September, ahead of pending changes to federal bankruptcy law.

Utah's second-largest carrier, Southwest, on the other hand, posted a $159 million profit last quarter.

Part of the desire to rework the tax code arose from the idea that lessening corporate tax burden could spur economic development. Many businesses locate in Utah because of the easy access and copious flights out of Salt Lake City's airport, Bramble said. Since the airlines are a large drawing point for other businesses, it seems reasonable that the state should work to make sure they are viable, he said.

"Some may claim that (the airlines) are seeking corporate welfare," Bramble said. "But they didn't approach us, I approached them. . . . We want to know what areas of our tax policy would they like to look at that would help them in their current financial struggles."

Airlines, led by Delta, succeeded four years ago in gaining significant tax concessions on fuel. The tax discussions initially made a splash as reports surfaced that Delta might pull its hub from Salt Lake City without tax cuts. The airline later backed away from those suggestions, but the Legislature still approved significant tax cuts in 2001.

Those cuts came after intense negotiations between Valentine and Salt Lake City Mayor Rocky Anderson. Under those cuts Salt Lake City's Department of Airports lost $1.25 million annually, which Anderson maintained would be palatable because it would promote "consumer-friendly competition" between the airlines.

During those 2001 discussions Delta maintained that 43 cents of every dollar of profit it earned in Utah went to taxes.

"We are seeking some relief on the amount of tax that we pay there; that's the bottom line," Delta spokeswoman Alicia Watson said then.

Holbrook said this year's strategy will be twofold: keep the tax cuts gained in 2001 and seek even more state concessions.

"We want to keep the tax cut they have and maybe get some more," she said.

Still, Southwest district manager Ronan Rogers was a bit leery, especially since Valentine once advocated giving tax breaks only to Delta, forsaking smaller carriers.

"The last time Senator Valentine held hearings on that, it wasn't very friendly toward the airlines," he said.

Salt Lake City Department of Airports executive director Tim Campbell said his department gains $2.59 million from the state's 4- cents-a-gallon tax on jet fuel for commercial airlines. Half of that revenue is given back to the airlines. If the rest was taken away, the airport would likely have to make it up by raising other airline fees, which would all but defeat the purpose of the tax cut, he said.

Campbell noted that Utah's tax burden for airlines isn't overly high and isn't really a factor in determining how airlines expand service in Utah.

"They're not going to add or cut service here based on our reasonable taxes."

E-mail: bsnyder@desnews.com

Source: Deseret News (Salt Lake City)

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