Skip to main content
The Globe and Mail
Support Quality Journalism
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); }

The Airbus U.S. Manufacturing Facility in Mobile, Alabama.

Michael Spooneybarger/Reuters

U.S. airlines are scrambling to digest a new 10 per cent tariff on European-made Airbus planes that threaten additional havoc in an aircraft supply market already reeling from frozen deliveries of Boeing’s 737 Max.

In a statement late on Thursday, Delta Air Lines called the proposed levy on aircraft from Europe that are already under contract for purchase “an unfair tax on U.S. consumers and companies.”

The tariff on Airbus planes creates uncertainty for aircraft delivery terms much like the global grounding of Boeing’s 737 Max in March after two fatal crashes and comes at a time of threats to international air travel demand in the midst of slowing global economic growth and trade disputes.

Story continues below advertisement

No. 2 U.S. carrier Delta is not a 737 Max customer but with some 266 Airbus orders is the most exposed to aircraft levies due to take effect on Oct. 18 after the World Trade Organization gave Washington the right to impose tariffs on $7.5-billion worth of EU goods annually in a long-running case.

Delta spokeswoman Lisa Hanna called on the Trump administration and EU to resolve the 15-year trade dispute “in a manner that respects existing contractual rights.” Still, it welcomed Washington’s decision to exempt aircraft production and deliveries from Airbus’ plant in Mobile, Alabama.

Reuters

The exemption means that the impact for U.S. airlines with orders for Airbus aircraft assembled in Alabama can be mitigated, Cowen analyst Helane Becker said, pointing to no-frills carrier Spirit Airlines as one carrier whose order book would mostly come from Alabama.

Shares of U.S. airlines rebounded on Friday after two days of losses.

Airbus’ Alabama plant produces four A320-family narrow-body jets a month, and Credit Suisse analyst Jose Caiado estimated that the plant could fulfill at least half of the U.S. backlog over the next year at a rate of five jets per month.

Most of budget-friendly carrier JetBlue Airways’ orders for narrow-body A321s and A220s would also be among those exempt, but the carrier still warned of a hit to travellers and commercial aviation.

“We are concerned about the detrimental impact aircraft tariffs will have on the ability for low-cost carriers like JetBlue to grow and compete, which will harm customers who rely on us to offer competitive, low fares,” spokesman Derek Dombrowski said.

Story continues below advertisement

JetBlue continues to advocate for a resolution, he said.

Delta and JetBlue, with the second-largest Airbus order among U.S. carriers, had both lobbied for the tariffs to be applied only to new orders.

Delta and United Airlines have the most orders for A350 and A330neo wide-body jets, which Airbus cannot finish in Alabama. Wide-body jets, with more premium seats, tend to have higher margins for airlines.

Just last week Delta pledged to buy 14 more A350s as part of a strategy to grow in Latin America through the acquisition of a 20 per cent stake in LATAM Airlines Group.

American Airlines Group and Alaska Air Group also have Airbus orders, as do lessors like Air Lease Corp.

Most aircraft leases place the burden of taxes, maintenance and insurance on the operator, Macquarie analyst Susan Donofrio said, but noted “it is unclear as to how far reaching the definition of taxes are in lease agreements in a unique scenario such as this one.”

Story continues below advertisement

The head of Ireland’s Ryanair urged the United States and European Union to pull back from a tariff war over aircraft subsidies and said he would ask Boeing to “eat” any counter-tariffs imposed on the U.S. firm by the EU.

Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.

Report an error
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies