The Tax Cut May Not Deliver All Its Promises

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The Tax Cut May Not Deliver All Its Promises


A basic truth in life is that, if it sounds too good to be true, it usually isn’t all it’s cracked up to be. The same applies to investing. You have probably heard how great the tax cut will be for companies across the board. Well, ‘warts’ are already appearing on the tax cut front.

In an earlier article I on taxes I wrote: “Will the airlines just use the [tax] windfall to launch into another round of airfare wars? (See article here.) The industry has squandered windfalls in the past, such as from plunging oil prices.”

Based on the recent earnings call from United Continental Holdings (NYSE: UAL), it looks like another airfare price war is just around the corner.

The Airlines Never Learn

UAL’s management said it plans to increase available seat miles over the next three years by 4% to 6% per year. That compares to a 3.5% rise in 2017 and only a 1.4% rise in 2016. That sounds a lot like previous mistakes of expanding too much too quickly and then being forced to slash ticket prices.


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