The U.S. state of Georgia is suspending its 4% tax on jet fuel, effective August 1, 2018. The move comes months after the tax was re-instituted in order to penalize its hometown Delta Air Lines, which will now be the biggest beneficiary of the tax break, saving about $40 million a year.

On July 30, 2018, Georgia Governor Nathan Deal signed an executive order to stop collecting the 4% sales tax on jet fuel across the state effective August 1, 2018. Local sales taxes on jet fuel were briefly suspended earlier this year, as the Deal administration concluded that the U.S. federal law prohibits jet fuel sales taxes from being used for anything other than airport improvements.

But the tax was put back in place in retaliation for Delta severing ties with the National Rifle Association (NRA). The Atlanta-based airline had halted a discount program for members of the organization following the mass shooting at a Florida high school on February 14, 2018, infuriating some Republicans ahead of local elections.

It’s all strictly business

To date, Georgia’s 4% tax on jet fuel has been among the highest in the U.S. behind only Illinois, California and Michigan. Other U.S. states, such as Florida, New York, North Carolina, Arizona, have made steps to lower their taxes on jet fuel, and some, like Ohio, Delaware and Texas, impose no tax at all, putting Georgia at a disadvantage.

According to Airlines for America (A4A), the industry organization representing the leading U.S. airlines, Georgia ranked eighth on the list of U.S. states with the most burdensome tax on commercial jet fuel, “one of the largest expenses for the aviation industry,” the organization says. It points out that following the elimination of the tax in North Carolina in 2015, flights in and out of the state grew by 4% and 31 new routes were introduced, all in one year.

Where it hurt most

According to the Governor, Georgia airports generate $62 billion in economic activity each year. Instrumental in Atlanta’s – as well as the entire state’s – economic growth has been the Hartsfield-Jackson Atlanta International Airport (ATL). Flights at this hub alone support $11 billion in investment and 42,000 jobs across Georgia, USA Today reports the Governor saying.

Hartsfield-Jackson is a major transit hub for both domestic and international travel. According to Airports Council International (ACI) world airport traffic rankings, as of April 2018, the airport was (once again) announced the busiest in the world, with nearly 104 million passengers traveling through it in 2017. Oh, and Hartsfield-Jackson is also Delta’s main hub.

Georgia’s hometown carrier operates the world’s second-largest fleet, with a total of 867 aircraft just in its mainline fleet, and is the country’s second-largest airline (right behind American Airlines (A1G) (AAL) on both counts), carrying more than 180 million passengers across its global network each year. It was reported that in light of the jet fuel tax, some U.S. states have even proposed Delta to relocate its hub.

The applause

It is estimated that the jet fuel tax, since its introduction in 2005, cost Delta an estimated $40 million per year. No surprise, hence, that the airline, as well as other U.S. carriers who will benefit from the tax break, have hailed the order, thanking the Georgia Governor and emphasizing the economic boost for the airline industry.

"Delta wants to thank Gov. Deal for his steps to ensure that the state of Georgia will remain competitive in the global economy,” said Delta CEO Ed Bastian in response to the news. “With 33,000 employees in Georgia, we are honored to call this our home state, and proud of the $58 billion in economic impact that Hartsfield-Jackson Atlanta International Airport creates statewide every year.”

Bastian concluded by saying: “The savings will allow us to invest additional flights into Georgia in the years to come. We look forward to continued growth of our service in Georgia and the job creation that will accompany it," as quoted by The Atlanta Journal-Constitution.

Allegiant Air responded to the news with the following statement: "We appreciate the governor’s support of commercial air service in the state… This decision encourages ultra-low-cost-carriers like Allegiant (ALGT) to continue providing affordable air travel for Georgia residents and those wishing to vacation in this great state,” USA Today reports.

Finally, Airlines for America has also welcomed the Governor Deal‘s move, saying that the executive order will encourage the airline industry “to continue to invest in the state’s future”, which it says will lead “to new and diverse flight options, lower fares, and greater opportunities for job growth at the world’s busiest airport”. According to A4A President and CEO Nicholas E. Calio, “These improvements will benefit everyone who flies.”