The dramatic cut in corporate business taxes recently passed into law by the US government is likely to increases corporate spending and, by extension, business travel, analysts with Bank of America say.
CNBC reports industry analyst Andrew Didora as saying that the cut in the corporate tax rate should be especially beneficial to airlines like American, United, and Delta, which cater more directly to corporate clients. Approximately two-thirds of revenues garnered by these airlines comes from business travellers.
“We view tax reform as a significant positive for corporate spending … and we believe this can drive a pickup in corporate travel pricing,” wrote analyst Andrew Didora.
“Since 2014, we estimate corporate pricing is down 14 per cent … 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.”
Didora recommended that investors buy stock in American, United, and Delta.
In December 2017, the US Congress passed, and President Donald Trump signed, a law that lowers the US corporate tax rate from 35 per cent to 21 per cent.