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Strategies & Market Trends : Joe Copia's daytrades/investments and thoughts -- Ignore unavailable to you. Want to Upgrade?

To: Joe Copia who wrote (24364)	3/25/2002 4:36:09 PM
From: Joe Copia	Read Replies (1) \| Respond to of 25711

Will the Airline's go up on this? (Reuters 03/25 16:31:07) UPDATE 1-U.S. airlines to get cash refunds from tax change Updates with UAL receiving $464 million; recasts lede, comment from Delta spokeswoman) By Kathy Fieweger CHICAGO, March 25 (Reuters) - Money-losing U.S. airlines including the two largest, UAL Corp. <UAL.N> and AMR Corp. <AMR.N>, on Monday said they were each getting several hundred million dollars in tax refunds due to a recent tax law change. President George W. Bush on March 9 signed an economic stimulus package allowing companies to "carry back" net operating losses incurred during 2001 and 2002 over the last five years. Tax laws previously allowed a carryback period of only two years. Representatives for No. 2 United and No. 1 American confirmed Monday that they had or would be getting the tax refunds, worth several hundreds of millions of dollars. United Airlines spokeswoman Susana Leyva told Reuters the carrier had already received the $464 million tax refund as a result of the change. United filed for the refund March 18 and received it two days later. Under the old version of the law, United received $169 million in February, Leyva said. The airline has also received $644 million in direct cash aid from the landmark bailout act passed shortly after the Sept. 11 attacks, bringing its total financial aid from the government to more than $1 billion. Delta Air Lines Inc.<DAL.N> spokeswoman Peggy Estes said the No. 3 airline, based in Atlanta, is in the process of filing amended tax returns. ANOTHER SHOT IN THE ARM Richard Gritta, a finance professor at the University of Portland in Oregon with expertise in airlines, called the carry-back extensions and resulting tax refunds another move to help ailing airlines. Congress passed a landmark $15 billion bailout package for the industry shortly after the Sept. 11 attacks, which included $5 billion in direct cash aid. "My guess is that the entire industry could get a $2 billion infusion of cash from the carrybacks," Gritta said. "It allows the carriers to go back and get refunds for taxes paid in past years because of losses this year (and last.) That's a big deal." Most major U.S. airlines wracked up record-breaking losses in 2001, in some cases amounting to billions of dollars, after September's attacks threw the industry into a tailspin. Travel demand initially dropped by half and still has not fully recovered to normal levels. Typically, companies that incur net operating losses pay no taxes in the current year and can claim a refund for prior years' taxes paid, then carry over the losses to future years. Airlines are getting ready to report first quarter results, which some have already indicated will continue to be losses. US AIR TO GET NEEDED CASH US Airways Group Inc. <U.N>, the No. 6 U.S. carrier, could get a needed $200 million cash tax refund in the second quarter from the change, said Lehman Brothers analyst Gary Chase. "A tax law recently enacted could provide US Airways with a substantial and much needed liquidity boost," Chase said in a research report. "A tax refund of $200 million would significantly reduce the near-term liquidity risk of the airline; $200 million would increase US Airways' cash position by more than 30 percent." Separately, AMR Corp.'s <AMR.N> American Airlines on Friday said in a filing with the U.S. Securities and Exchange Commission that it also expects to "recover several hundred million in taxes" as a result of the tax law changes. "You can consider this a rebate on previously paid taxes," American Airlines spokesman Al Becker told Reuters on Monday. He pegged the amount "in excess of $200 million." AMR, based in Dallas/Fort Worth, posted a 2001 net loss of $1.76 billion. Chase said US Airways could end the first quarter with as little as $650 million in cash. A spokesman for US Airways, based in Arlington, Virginia, declined to comment on the potential refund or the first-quarter cash position. Demand for air travel plunged following the Sept. 11 attacks, but major U.S. carriers dependent on lucrative business travelers had already begun to suffer from soft demand before the suicide hijackings of four airliners. AMR also said in the SEC filing that the tax law change will result in an accounting charge in 2002. During the 1996-2000 period, a tax benefit was recorded for foreign income taxes paid which were used as a credit against AMR's U.S. tax liability. The elimination of its tax liability from these earlier periods means foreign tax credits cannot be used in those years and must be carried forward to future years, AMR said. However, the carryforward period will expire before all of these credits can be used. As a result, AMR said it expects to record a tax charge of up to $55 million to reflect the forfeiture of these tax credits. This charge will be split between the first and second quarters of 2002. ((--Chicago Equities News at 312-408-8787, chicago.equities. newsroom@reuters.com)) REUTERS S.RT UAL AMR DAL U AIR.R SP500.R US.R RES.R USC.R DBT.R