As Republicans point to bonuses being handed out by companies like AT&T, Comcast, Fifth Third Bancorp and Wells Fargo to show that the tax bill is working, Southwest Airlines and American Airlines have joined in the bonus parade, announcing on Tuesday that employees will get $1,000 bonuses each.
American and Southwest said that they will pay employees bonuses of $1,000 each, which American Airlines said would cost $130 million.
I’m proud to report we are rewarding our Employees with a $1,000 bonus with the anticipated savings from the tax reform legislation, we are contributing an additional $5 million in charitable donations, and we are making investments in our fleet and our business. pic.twitter.com/h4GVqRrXzX
— Gary Kelly (@gary_kelly) January 2, 2018
Southwest also said that it exercised options to buy more new jets from Boeing while delaying orders for some others.
Unlike most other U.S. airlines, Dallas-based Southwest has long been profitable and already pays cash income taxes. It earned $1.6 billion in the first nine months of 2017, and will benefit immediately from the lower rate on corporate income in the tax bill that President Donald Trump signed last month.
Southwest said it expects to record a non-cash credit of between $1 billion and $1.5 billion in the fourth quarter to reflect the difference in rates between the time the tax expenses were accrued and when they will be paid.
— americanair (@AmericanAir) January 3, 2018
Because of huge losses in previous years, other major U.S. carriers do not pay cash income taxes even though they have become hugely profitable. American, for instance, earned $1.7 billion in the first nine months of last year. All the airlines should benefit, however, from a provision in the new law that lets businesses more quickly depreciate the cost of investments — aircraft, in their case.
CEO Doug Parker and President Robert Isom said the new tax law will help American in the long run, presumably when it can no longer avoid income taxes by counting past losses. They said the tax changes will give the company more confidence to invest in planes and facilities and pay the employee bonuses.
American said employees at the main airline and its regional affiliates would get their money in the first quarter. Southwest said it will make payments next Monday.
Southwest also said that it will donate an extra $5 million to charities in 2018. A spokesman for the company said it paid out more than $25 million in cash, free tickets and other donations to charity in 2016, the last year for which final figures are available.
President Donald Trump commented on the bonus news Tuesday.
“Companies are giving big bonuses to their workers because of the Tax Cut Bill. Really great!” he tweeted.
The Associated Press contributed to this report.