US airlines have joined forces to lobby the White House for exemptions from tariffs as the cost of parts and aircraft skyrocket. This comes on the heels of a major airline CEO declaring airlines have already hit a recession.
As the current airline crisis is a direct result of US President Donald Trump’s trade war and a concurrent slump in demand, Reuters says, industry representatives met with Trump and administration officials to request the restoration of duty-free status for aircraft and airplane parts. “Trump's tariffs have ended its decades-old duty-free status,” the news service said.
"Very Hard For Canadian Carriers"
Canadian carriers are also feeling the pain. A former high-ranking official with a major Canadian airline told Open Jaw that every airplane in Canada has parts from around the world.
"In addition to the challenges of the exchange rate, any parts that are sourced via the US incur a tariff. Prices will go up to buy and repair aircraft, as any parts that face a tariff will have increased prices passed on to the end user."
The official said the US might pay a tariff for a part imported from another part of the world, and then a Canadian airline would have to pay another tariff to import that part to Canada.
"The tariff effect is cumulative," he said. "This is very hard for Canadian carriers."
The R Word
The Straits Times reports Southwest Airlines’ chief executive officer isn’t waiting for economists to declare a technical downturn in the US economy: As far as he’s concerned, a recession has already started.
Noting demand for domestic leisure travel has dropped more than he’s ever seen outside of the Covid-19 pandemic, Bob Jordan said last week that an economic contraction is in full swing in the US airline industry.
“I don’t care if you call it a recession or not, in this industry that’s a recession,” Jordan said in an interview with Bloomberg.
The “R” word has been bandied about a good deal by analysts but Jordan appears to be the first senior aviation official in the US to say airlines are in a recession.
“When consumers are uncertain, they pull back,” Jordan said. “Consumers can immediately stop spending.”
Exemption
Aviation Week said recently, “While the simple narrative has followed ‘American’ Boeing and ‘European’ Airbus, aircraft built by both companies contain thousands of components sourced from a vast, worldwide supply chain for everything from engines and fuselages to harnesses and brackets.
“That ecosystem has been turned on its head by U.S. President Donald Trump’s April 2 imposition of hefty tariffs on nations around the world.”
Reuters said the aviation industry expects a tariff exemption would help them keep costs down during a sharp pullback in travel spending by consumers worried about slower economic growth and higher inflation.
As Open Jaw reported last week, airlines have been trimming flights in response to lower travel demand. Several major US airlines also have scrapped their financial forecasts in light of a highly unpredictable period for the aviation industry.
