Jan 30, 2018,  by Allianz Partners Business Insights

United States: Lower taxes boost business travel

Corporate travel operators are just some of the companies benefitting from the United States tax reforms voted in last December. The corporate tax rates were lowered, meaning that companies will now have more money to spend on business trips for their employees. A godsend for the most popular corporate airlines.

The United States’ corporate tax reform, launched in December 2017, and the subsequent lowering of taxes in 2018 looks set to boost the business travel sector and increase turnover for the industry’s big names.

The money that American companies will save on taxes can now be spent elsewhere, namely sending their employees on business trips, says Business Travel.

 

Good news for the airlines used by business travellers

 

Just some of those who will benefit from the change are the airlines used by North American business travellers, said Andrew Didora, a financial analyst from the Bank of America Merrill Lynch, to CNBC. The specialist has upgraded the investment bank’s rating of American Airlines to “buy” and reiterated its “buy” ratings for Delta and United Continental.

There is “a solid backdrop for the legacy airlines that are more levered to corporate travel than domestic, leisure-oriented airlines,” analyses Andrew Didora. Business trips make up two thirds of the aforementioned airlines’ revenue.

 

Increased international competitiveness

 

While these companies all underperformed in 2017, the value of American Airlines and United Continental’s shares had increased on 9th January, just after the Bank of America Merrill Lynch’s decision was published. Delta’s shares also increased, before subsequently dipping.  

In December 2017 the United States Congress voted in a law regarding corporate taxes, instigated by Donald Trump. The American president hoped to help his country to increase its international competitiveness.

The tax rate was reduced from 35% to 21%, with the aim of enabling companies to have more money for their day-to-day functioning and for investments. According to the experts, the main companies to benefit from this tax reform are the industrial and financial industries.

 

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