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Airlines: How Tax Reform Will Fly

Bernstein's David Vernon and his team take a look at airlines on Monday, given a higher probability of tax reform passing, using the Senate version of the bill as his template. Vernon estimates that tax reform would lead to EPS accretion from 22% to 24%, while levered free cash flow would increase from 10% to 40% in the long run. Most of the large airlines are not paying cash tax, but could see smaller point to point competitors use tax proceeds to take share.