Delta Air Lines and European aircraft manufacturer Airbus have devised a clever hack to get around President Trump’s tariffs, and other US airlines could also follow suit as they seek to avoid a massive markup on new airplane purchases that would ultimately be passed on to passengers in the form of higher ticket prices.
At present, all imports from the European Union to the United States are subject to the Trump administration’s 10% tariff, although that could shoot up to 20% or more within the next few months, which represents a huge additional cost for a multi-million-dollar airliner.
Last month, Delta made it very clear that it would refuse to bear the cost of Trump’s tariffs on new airplane deliveries from Airbus, and there was speculation that it would simply defer new deliveries until the EU had worked out a trade deal with the United States.
But when you consider that the Atlanta-based carrier is expected to take delivery of at least 35 state-of-the-art Airbus A350s that are built in Europe in the next few years, deferring deliveries indefinitely could seriously stunt Delta’s growth plans and hinder its ability to compete with the likes of United.
One idea was for Airbus to absorb some of the extra cost, but Chief Executive Guillaume Faury has ruled that suggestion out, so the two companies came up with an alternative plan to bypass Trump’s tariffs altogether.
“They’re also not very much willing to pay tariffs, but it’s on them.”
Airbus Chief Executive Guillaume Faury said of airlines not wanting to pay President Trump’s tariffs.
“We’re looking at opportunities to export to somewhere else than the US, especially for airlines who have international operations,” Faury commented during an earnings call on Tuesday – hinting at a workaround that Delta has already used.
Last week, Airbus flew a new A350 jet from its plant in Toulouse, France, to Tokyo, where representatives from Delta were waiting to take the keys. The flight from Toulouse to Tokyo effectively makes the plane second-hand, but to ensure the hack is watertight, Delta will only use this plane on international flights.
In other words, the plane is never imported for tax purposes into the United States, so Trump’s tariffs can’t be applied.
Faury noted during the earnings call that Airbus was working with several other customers on how to deal with the “situation,” although their ability to circumvent the tariffs will depend on their route network.
In terms of single-aisle jets, Airbus has a manufacturing plant in Mobile, Alabama, which will help avoid major sticker shock for US airlines, but Faury says it’s not quite as clear-cut as that.
Aircraft manufacturing is a global business. The final assembly line might well be in the United States, but various parts used in the manufacture of these planes are made in lots of different countries and then imported to the United States.
There won’t be any easy way to avoid the Trump administration’s tariffs on these parts, so the cost to manufacture planes, even ones built in the United States, is going to go up.
Faury was blunt on this topic – airlines might not want to pay extra for these planes, but Airbus isn’t going to absorb the cost.
How Delta and Airbus Outsmarted President Trump
The first Airbus A350 that Delta plans to take delivery of since Tump’s tariffs came into force will be registered as N528DN and was only built earlier this year. The plane has carried out a few test flights around France and was meant to be delivered direct to Delta at its Atlanta hub from the Airbus delivery center in Toulouse.
The new plan, however, is for the aircraft to be first flown to Tokyo Narita, where Delta representatives and pilots will be waiting to take delivery of the plane in Japan.
Because the aircraft is being delivered outside the EU, it won’t be considered new and should, technically, be exempt from Trump’s tariffs. On top of that, however, Delta only intends to use this A350-900 on international flights, meaning it will never be truly “imported” into the United States.
Unpatriotic!!! Hope Trump fines Delta & increases the tariff on Airbus. 😡