Newly imposed tariffs could prompt airlines to delay retiring older jets and drive up demand and prices for used aircraft.
That is according to the chief executive of aircraft leasing firm AerCap, who says tariffs might also lead some countries to relax regulations that now limit airlines’ ability to import older leased aircraft, which would further inflate demand for older jets.
“Ultimately, someone has to bear the additional cost on the system,” CEO Aengus Kelly said of tariffs on 30 April during AerCap’s first-quarter earnings call. “Who that will be – the ultimate consumer, the OEM, the airlines, ourselves –we have to wait and see.”
Exactly how the ongoing trade war will impact the aerospace and airline industries remains uncertain, though tariffs have already prompted Chinese carriers to stop receiving new Boeing jets. Boeing in recent weeks flew some 737 Max back to Seattle from China.
President Donald Trump in April slapped 10% tariffs on most imported goods and hit China with import duties of 145% on some goods, prompting China to respond with 125% duties on imported US products.
There have been hints in recent days that US-China trade tensions may be cooling, with China’s commerce minister reportedly lamenting tariffs as harming Chinese airlines and Boeing, and expressing hope for de-escalation.
Kelly says Airbus jets imported to the USA are now subject to the import duties, as are Boeing jets in China.
AerCap does not expect tariffs will drive up its costs in the near term thanks to provisions within its contracts with manufacturers.
“We have fixed caps of escalation in place, so on these contracts it won’t affect us,” he says. “[Tariffs] are not having a significant impact as yet, but it is very early in the game.”
Still, broader market shifts could be in store.
“If the Europeans retaliate and match the US tariffs… used aircraft values [will] increase,” Kelly says. Also, countries including China and others in Asia could seek to minimise tariff fallout by removing “the age limitation off leased aircraft”.
Many countries’ aviation regulators cap or restrict the importation of older leased jets, such as those more than 20 years old.
“What you would then find is that demand for new aircraft would be dampened, because that is a lot of aircraft that would not leave the market and stay in service,” Kelly says.
The aerospace industry has been lobbying the Trump administration to exempt the sector from tariffs, noting that US aerospace manufacturers export more goods than they import and that the global aerospace industry has operated largely tariff-free for decades.
