US airlines grapple with 'unfair tax' that adds to aircraft supply disruption
US airlines are scrambling to digest a new 10% tariff on European-made Airbus planes that threaten additional havoc in a market already reeling from frozen deliveries of Boeing's 737 MAX. Late Thursday, Delta called the proposed levy on aircraft from Europe that are already under contract for purchase "an unfair tax on US consumers and companies." The tariff on Airbus planes creates uncertainty for aircraft delivery terms much like the global grounding of Boeing's 737 MAX in March after two fatal crashes and comes at a time of threats to international air travel demand in the midst of slowing global economic growth and trade disputes. Delta is not a 737 MAX customer but with some 266 Airbus orders is the most exposed to aircraft levies due to take effect on Oct. 18 after the World Trade Organization gave Washington the right to impose tariffs on $7.5b worth of EU goods annually in a long-running case. Although the overall value of trade hit by sanctions was in line with expectations reported by Reuters, percentage tariffs were less than expected with Airbus planes initially subject to a tenth of the 100% rival Boeing had recommended. Market sources said this was enough to disrupt trade in the cut-throat plane business but low enough to tempt some airlines to negotiate for Airbus to absorb some of the cost, squeezing its margins. "10% is a deal breaker for airlines," an industry source said, noting that planes liable to the tariff may have to be delayed. Planemakers are typically reluctant to absorb such costs, the source added. On a positive note aircraft parts were spared from tariffs, which means independent repair shops, some feeling pain from the grounding of the Boeing 737 MAX, will continue to function. That will benefit Boeing and Airbus fleets equally, industry sources said.<br/>
https://portal.staralliance.com/cms/news/hot-topics/2019-10-07/general/us-airlines-grapple-with-unfair-tax-that-adds-to-aircraft-supply-disruption
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US airlines grapple with 'unfair tax' that adds to aircraft supply disruption
US airlines are scrambling to digest a new 10% tariff on European-made Airbus planes that threaten additional havoc in a market already reeling from frozen deliveries of Boeing's 737 MAX. Late Thursday, Delta called the proposed levy on aircraft from Europe that are already under contract for purchase "an unfair tax on US consumers and companies." The tariff on Airbus planes creates uncertainty for aircraft delivery terms much like the global grounding of Boeing's 737 MAX in March after two fatal crashes and comes at a time of threats to international air travel demand in the midst of slowing global economic growth and trade disputes. Delta is not a 737 MAX customer but with some 266 Airbus orders is the most exposed to aircraft levies due to take effect on Oct. 18 after the World Trade Organization gave Washington the right to impose tariffs on $7.5b worth of EU goods annually in a long-running case. Although the overall value of trade hit by sanctions was in line with expectations reported by Reuters, percentage tariffs were less than expected with Airbus planes initially subject to a tenth of the 100% rival Boeing had recommended. Market sources said this was enough to disrupt trade in the cut-throat plane business but low enough to tempt some airlines to negotiate for Airbus to absorb some of the cost, squeezing its margins. "10% is a deal breaker for airlines," an industry source said, noting that planes liable to the tariff may have to be delayed. Planemakers are typically reluctant to absorb such costs, the source added. On a positive note aircraft parts were spared from tariffs, which means independent repair shops, some feeling pain from the grounding of the Boeing 737 MAX, will continue to function. That will benefit Boeing and Airbus fleets equally, industry sources said.<br/>
