Published on : Saturday, January 13, 2018
According to Bank of America Merrill Lynch, the tax reform should boost business travel this year and which in turn should simultaneously boost shares of the country’s biggest airlines, including American Airlines, United Continental and Delta.
Analyst Andrew Didora thinks tax reform will bring a significant positive for corporate spending which can eventually drive a pickup in corporate travel pricing. “This coupled with strong international fundamentals should create a solid backdrop for the legacy airlines that are more levered to corporate travel than domestic, leisure-oriented airlines”, wrote Andrew.
The three big airlines generate about two thirds of their revenue from business travel and that any recovery in corporate pricing as a result of the Republican tax plan should disproportionately benefit those companies, believes the analyst.
In the new tax law, there is a corporate tax rate of 21 percent which is down from 35 percent in an effort to make the U.S. more competitive globally. It is expected that the new law will free up cash in a slew of industries which will include financials and industrials.