Airbus's top executives have warned that retaliatory aviation sector tariffs between the US and Europe could raise the price tags of aircraft and potentially hurt its chief rival Boeing, as President Donald Trump's rapid pivots on US trade policy stoke uncertainty for businesses around the world.
Aviation is a “North Atlantic ecosystem: there's a lot of parts and goods going from Europe to US and US to Europe … we think it will be a lose-lose situation to put tariffs”, Airbus chief executive Guillaume Faury told The National in Toulouse on the sidelines of the annual Airbus Summit.
“In a number of scenarios, tariffs would much more impact US activities than non-US activities, given the nature of this industry.”
Airbus CEO
For now, there have not been indications of aviation-related tariffs targeting the sector and, Mr Faury said, he hopes this will continue to be the case.
“I continue to hope there will be no tariffs targeting aerospace … and if we have, then, we have to understand what it looks like and what we need to do to respond to the situation,” he said.
In a scenario where Airbus' US airline customers are impacted by potential tariffs, Airbus “can adapt because of the demand we have”, Mr Faury added.
“We will adapt to the situation, including potentially by redirecting our clients, but again, we are not in that situation today.”
Airbus is currently in “wait-and-see mode” until it becomes clear if any tariffs will be imposed on the sector, by when and what will be the potential retaliation from Europe, according to Mr Faury.
“There's plenty of scenarios and we are trying to understand,” he said.
Mr Faury told the summit that in most scenarios, potential tariffs would be “very damaging” to the US aviation industry, and therefore, “it is not very likely” that the Trump administration would impose tariffs on aviation.
“We are in an industry where putting tariffs will be very damaging, probably more damaging to the US at first glance or they would have to be very sophisticated, we don't know what the response would look like so we are in wait-and-see mode.”
Airbus has a significant manufacturing base in the US with a plant in Alabama where it has final assembly lines for the A220, A320 and A321 narrow-bodies. The French plane maker also assembles and retrofits civil and military helicopters in Mississippi and produces satellites in Florida. Employing more than 5,000 people in the US, Airbus also supports 275,000 American jobs through its annual spending of $15 billion with more than 2,000 suppliers across 40 states, according to its website.
Its production factories in the US potentially gives Airbus more leverage to mitigate potential fallout from tariffs.
“What President Trump is trying to achieve is to encourage activity, work, jobs, employment in the US and this is very much contributing to jobs in the US,” Mr Faury said.
More expensive planes
Depending on the potential tariffs, they could result in a bigger price tag for supplies and aircraft, Wouter van Wersch, executive vice president International at Airbus, told The National.
“Depending on how it is positioned, it can make our supply more expensive and it can also make the price of the aircraft more expensive. Ultimately, it's not the best situation for the industry,” he said.
“We like a free world and everything that promotes the free trade of goods is helping us and other manufacturers because everybody is in the same boat.”
Imposing tariffs could hurt the aviation industry's rebound as the supply chain continues to heal from the impact of the Covid-19 pandemic. Airbus receives a million parts for one aircraft and has thousands of suppliers worldwide.
“Many of the suppliers are still recovering from Covid [impact] and at the same time, we've got our massive backlog and we need to ramp-up [production],” Mr van Wersch said. “So clearly, the tariffs are an additional burden that we would like to avoid.”
As a company with a global supply chain, with assembly lines in Europe, the US and China, Airbus is closely monitoring developments around tariffs, but it is “too early” to say what the impact will be, he added.
“Like many other companies, we are assessing how this is all going to evolve, and especially assessing the impact on our operations and the supply chain,” he said. “We have a very wide supply chain … we have a very strong risk-management system and we are trying to see where this is going.”
Christian scherr, chief executive of the Commercial Aircraft business of Airbus, told the summit Airbus needs to understand what the tariffs are “before we can draw conclusions, whether it's for us, for our suppliers, who we would be worried about, or for our competitors”.
US-China trade tension
Rising trade tension between the US and China since Mr Trump's first term have helped Airbus gain the upper hand over Boeing in supplying aircraft to China, the world's second-largest aviation market.
Airbus also has the advantage of a final assembly line in Tianjin in northern China that produces the popular A320 family of narrow-body aircraft.
“We have maintained a professional business relationship with our Chinese partners, whereas the situation of Boeing has been indeed impacted by the general situation of political tension between the US and China,” Mr Faury said.
“So, it's probably a situation that is different than what Boeing is having but we are looking at our own way of doing business with our Chinese stakeholders. We try to continue to do the right things, and that's where we are, working directly with the airlines and Chinese stakeholders.”
Last week, in a meeting with Mr Faury in China, the country's Commerce Minister Wang Wentao said China's trade policies towards trading partners, including the EU, have consistently been stable. He also welcomed European companies to increase their investment in China, according to a ministry statement, adding that China will continue to improve its business environment, and will vigorously encourage foreign investment.
Airbus' outlook
Earlier this month Airbus estimated it will deliver 820 aircraft this year, setting a modest target as the plane maker struggles with trade tension, persistent supply constraints and delays at some engine makers.
Airbus will absorb some parts of struggling US supplier Spirit Aerosystems, while Boeing is buying the majority of that company it once owned to gain better control over plane parts manufacturing.
Mr Faury said he is hopeful that Airbus taking over Spirit work packages for the A220 and A350 aircraft by midyear is a realistic timeline.
“I got from my team signals that things are coming together. It becomes more and more difficult to be done by the middle of the year, but that was the objective, so we keep sticking to that date for the moment to put pressure on the system so we can come to a result,” he said.
Mr van Wersch added that demand for new aircraft continues to hold strong, despite economic uncertainty, as airlines want to buy more fuel-efficient jets and replace older equipment.
“Today, if I look at all the campaigns we are working on, it is set to look very positive in the coming years. Middle East carriers are very ambitious and have an amazing position geographically to link the world.”
Mr Scherer said Airbus is beginning to see “encouraging signs” of improvement in the overall performance of supply chains, but as the plane maker increases production, it is facing some constraints that it is addressing.
“The overall noise or disturbance in the supply environment seems to be … on a somewhat positive trend,” he said.
Looking ahead, the Airbus chief executive is optimistic of a smooth landing.
“Take the example of a plane taking off from one place going to another with bad weather on the way, a bit of headwind, some turbulence, that's what we are experiencing. But we continue to target landing at our destination,” Mr Faury said.
