Airbus is examining various options to address the fluid US-driven tariff situation, both within its own supply chain and through negotiations with affected airline customers.
Speaking during a first-quarter briefing on 30 April, chief executive Guillaume Faury highlighted the rapidly-changing nature of the tariff regime – the airframer was still trying to confirm that China was easing its own tariffs on imported US aerospace components.
“As we progress on our assessments, we’re identifying the means to adapt and mitigate the impact by leveraging our industrial set-up as well as our strong and diversified backlog,” says Faury.
Uncertainty over the size of the tariffs, their extent and their longevity has left Airbus still trying to determine the potential impact – it has not yet included tariff effects in its full-year financial guidance.
Faury says the direct financial exposure for Airbus centres on increased costs for subassemblies, notably those being imported from Europe to its US final assembly lines in Mobile, and from the USA to its Chinese lines in Tianjin.
But he adds that the “volatile” tariff regime is “literally changing by the day”, and a lifting of Chinese tariffs – which the airframer was still analysing – could mean the impact on Tianjin could be “relatively limited” or even “close to nil”.
Faury believes the direct impact of tariffs could “likely be contained” in the current framework, should it continue to the end of the year.
But he says the company is also wary of potential indirect effects arising over time from a tariff impact on air traffic. “As of now we’ve not experienced any change in our supply-chain performance,” says Faury.
Each supplier is facing its own specific situation, he says, and there have been “as many reactions [to tariffs] as number of suppliers”. But there is a common interest in identifying the time buffer available, examining logistics flow and inventories, and understanding mechanisms which could be applied to offset the impact.
“We’re rather in a good place on that perspective, given the several re-shapings of ramp-up plans we’ve had,” says Faury.
He points out that Airbus was immersed in a transatlantic tariff conflict five years ago, following a World Trade Organization dispute.
“It’s all about managing the situation, keeping a cool head and working hard to find solutions,” he says. “That’s the mindset of the supply chain at the moment.”
While Airbus is having to deal with tariffs internally, it also faces possible resistance from airlines and other customers over the increased expense of importing new aircraft.
“Nobody wants to pay the additional cost,” says Faury.
There is no tariff for US customers on aircraft built in Mobile. But there is a duty on aircraft imported from Europe.
“They’re not very much willing to pay tariffs,” says Faury. “But it’s on them. And it’s not related to pricing power, because we’re not asking for an increase in the price – there is, on top of the price agreed by contract, an import duty for customers.”
He says Airbus is pursuing a similar strategy to that adopted during the WTO dispute, when tariffs of 15% were imposed on its imported aircraft.
“Which means we’re working on opportunities to export to somewhere else than the USA, especially for airlines who have international operations, and we have that flexibility,” he states.
“Or we’re finding arrangements with several customers with their network, their partners, on how to deal with the situation.
“And sometimes we’re in a situation where the airline ends up accepting to pay the import duties to the US administration to be able to import [aircraft].”
Faury says there are “different legal devices” which can potentially mitigate or alleviate the cost of importing, depending on the US content of the product, its destination, and other considerations, and these present opportunities to deal with the matter “at least in the short term”.
He cautions that, if the tariffs persist in the long term, the consequences on the US industry “will be significant” because they will “weight significant additional cost on doing business in the USA” if companies are relying on components, systems and aircraft being imported.
Faury believes the industry needs to return to the zero-tariff status on civil aerospace laid down in a WTO agreement concluded in 1979 and which entered into force at the beginning of 1980. The agreement eliminated tariffs on civil aircraft, their engines and components.
“I don’t see a change in nature in the discussion with customers, beside managing the tariffs themselves on the short term,” says Faury.
“It has not – or not yet – impacted the way we’d be dealing, contracting with customers [in the longer term], absent a clear picture on what a stabilised situation on tariffs would look like.”
Faury says he wants to believe that the “endgame” will be a reversion to the zero-tariff agreement on civil aerospace goods, given the impact on the US industry. “I want to remain optimistic that we’ll be back to [the previous] situation,” he adds. “By when, and how, remains to be seen.”
