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Smaller U.S. airlines bash Senate tax bill provision targeting Gulf carriers

JetBlue Airways, Hawaiian Airlines and other U.S. passenger and cargo carriers are vehemently opposing a provision in the Senate tax bill that would mandate several foreign airlines to pay U.S. corporate taxes on part of their profits.

The three major U.S. carriers — Fort Worth-based American Airlines, Atlanta-based Delta Air Lines and Chicago-based United Airlines — are embroiled in a long-running trade row with Persian Gulf carriers Emirates Airline, Etihad Airways and Qatar Airways.

U.S. Sen. Johnny Isakson, R-Georgia, recently placed an amendment to the Senate tax overhaul bill that would necessitate the Gulf carriers to pay the U.S. corporate taxes. Isakson, who represents Delta’s home state, expressed that his proposal is geared to foster fairness and competition.

New York City-based low-cost carrier JetBlue (Nasdaq: JBLU) and Honolulu-based Hawaiian Airlines (Nasdaq: HA) joined cargo carriers New York-based Atlas Air Worldwide (Nasdaq: AAWW) and Memphis-based FedEx Corp. (NYSE: FDX) in voicing their disapproval to Isakson’s amendment.

The four carriers, which make up a coalition called U.S. Airlines for Open Skies, lobbied for Congress to repeal section 14505 of the Senate Tax Cuts and Jobs Act. The coalition made public a statement calling the provision “another poorly veiled attempt by Delta to shield itself from competition.”

“This special interest ploy was designed to hurt the Gulf carriers but would actually impact airlines from as many as 14 countries and territories, such as Jordan, Ethiopia and Malaysia,” the statement says. “In addition, the provision opens the door to retaliatory taxes that would harm U.S. airlines, particularly U.S. cargo carriers.”

“Delta appears unconcerned about the collateral damage of its multi-million dollar lobbying campaign but Congress should be,” the statement read.

In addition to Delta (NYSE: DAL), American Airlines Group Inc. (Nasdaq: AAL) Chief Executive Doug Parker has zealously accused the Gulf airlines of competing unfairly in the U.S. by receiving tens of billions of dollars in state subsidies. The Gulf airlines have denied such claims.

Under existing international agreements known as Open Skies agreements, most foreign carriers pay zero taxes on gross income they earn when they fly into the United States. U.S. carriers receive the same treatment when they fly into most foreign airports. Airlines still pay landing fees and other charges to land in foreign airports.

Challengers of Isakson’s amendment say it would basically destroy decades of precedent — which the U.S. has long backed — on the taxation of international aviation.

America’s three biggest airlines charge the Gulf carriers of allegedly violating Open Skies agreements by taking in more than $50 billion in state subsidies since 2004.

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