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Georgia drops fuel tax after political brawl with Delta

The state of Georgia will suspend its tax on jet fuel in August, months after the levy was re-instituted after a politically-charged dispute with hometown Delta Air Lines.

Georgia governor Nathan Deal suspended the tax, which generated $39 million in revenue for the state during its 2018 fiscal year according to his office, with an executive order signed on 30 July.

“Providing tax relief to job creators will help us maintain our competitive advantage as a global hub for commerce now and in the future," he says, citing the economic benefit of air service and a desire to remain competitive versus other states with large hub airports.

The tax was only re-instituted in March in a politically-charged response to Delta's decision to end discounts for National Rifle Association (NRA) members. Lieutenant governor Casey Cagle led the move to not renew an exemption of the levy, which had been on the books since 2005.

Cagle, who sought to succeed governor Deal this November, lost his bid for the Republican nomination to competitor Brian Kemp on 24 July.

Delta is the largest beneficiary of Deal's executive order. The airline estimated in March that the levy would cost it roughly $40 million annually, admittedly a small amount compared to its $5.73 billion in fuel and related taxes bill in 2017.

However, any savings - no matter how small - will likely be appreciated as the carrier faces a $2 billion run up in its fuel bill this year due to high oil prices. It will shave up to a percentage point off of its systemwide capacity growth this fall in an effort to boost fares to offset the additional costs.

"Delta wants to thank governor Deal for his steps to ensure that the state of Georgia will remain competitive in the global economy," says Ed Bastian, chief executive of Delta. "The savings will allow us to invest additional flights into Georgia in the years to come."

The airline has added service to Shanghai Pudong from Atlanta to date in 2018, and is leaning towards launching new service to Mumbai from the airport in 2019.

Delta is one of the largest private employers in Georgia, with more than 33,000 employees in the state.

The mainline carrier operates its largest hub at Atlanta Hartsfield-Jackson International airport where it will operate 78% of departing seats in 2018, FlightGlobal schedules data show. Southwest Airlines is the second largest carrier at Atlanta with 10.4% of seats.

"These improvements will benefit everyone who flies," says Nicholas Calio, president and chief executive of industry organisation Airlines for America (A4A), emphasising how removing the levy encourages airlines to invest and expand from the state.

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