Delta Air Lines is calling on the US government and the European Union to negotiate a trade settlement to avoid tariffs that could raise the cost of its Airbus aircraft by 10%.
The Atlanta-based airline is responding to tariffs on new aircraft from Europe, which the Office of the US Trade Representative (USTR) announced earlier this week. The USTR said on Wednesday it would impose billions of dollars of tariffs following a World Trade Organization (WTO) landmark decision.
While Airbus’ primary production facilities are located in France and Germany, the airframer has a large presence in the USA, including an A320 and A220 assembly site in Mobile, Alabama. The ruling, which applies to aircraft built in the European Union, means that parts shipped over to be assembled in Mobile appear to be exempt from the additional tariffs. However, only a fraction of total A320 production is manufactured in Alabama.
“While we are pleased that aircraft production and deliveries from Airbus’ Mobile, Alabama plant will not be affected, the proposed 10 percent tariff on aircraft from the EU that are already under contract for purchase is just an unfair tax on US consumers and companies,” the airline says in a statement to FlightGlobal. “We hope that the administration and the EU are able to resolve this 15-year trade dispute in a manner that respects existing contractual rights.”
The USTR was given the green light to impose up to 100% tariffs on $7.5 billion of goods, including Airbus jets. However, it says it will initially impose 10% levies on new commercial aircraft of more than 30 tonnes, and 25% levies on other products, such as Irish and Scotch whiskies, German machinery, and cheese.
"Although USTR has the authority to apply a 100 percent tariff on affected products, at this time the tariff increases will be limited to 10% on large civil aircraft and 25% on agricultural and other products," it said on Wednesday. The tariffs are due to kick in as early as 18 October.
Delta operates the second-largest Airbus fleet of any US carrier, only behind American Airlines. Cirium data show that it has 297 Airbus aircraft in service, with another 246 on order, including 12 A350s and 31 A330s, which are produced and assembled in Europe and would be subject to the additional tariff.
For its part, American Airlines said it was “reviewing this week’s developments,” but offers no further statement. United Airlines and Frontier Airlines decline comment.
At the centre of the WTO ruling were EU subsidies for Airbus, which the arbitrator heavily criticised as being “WTO-inconsistent”, and causing adverse effects to the US. The US will be allowed to impose the tariffs until the EU brings its practices into compliance with WTO standards.
A second case before the arbitrator could result in even greater penalties. On Thursday, European trade regulators promised a counterstrike within months, which would further escalate the long-running subsidy dispute between Boeing and Airbus.
The European Commission says it has already drawn up a list of US export targets collectively worth about $20 billion – far greater than the $7.5 billion of countermeasures granted by the WTO to the US government, which had been pursuing remedies for $11 billion of harm caused by EU subsidies.
No WTO decision has been made on the size of the counter-award. European trade commissioner Cecilia Malmstrom also noted that the EU will "in some months, equally be granted rights" to impose tariffs against US exports, commercial aircraft included.