Turbulent Skies: The Impact of Tariffs on the Aviation Industry’s First Quarter Earnings

Turbulent Skies: Tariffs Weigh Heavily on Aviation Industry

As the first quarter earnings reports roll in, a troubling trend has emerged in the aviation sector: tariffs are proving to be a significant hurdle for airlines and aircraft manufacturers alike. With major players in the industry now revealing their financial standings, it’s clear that the impact of tariffs is akin to a gremlin on the wing, threatening to destabilize an already shaky flight path.

Airlines are reporting a decline in passenger numbers and have begun to retract their full-year forecasts. Meanwhile, aircraft manufacturers are facing logistical challenges, with jets bound for China being returned. The result? Shares of nearly all aviation giants are in the red year-to-date, signaling a turbulent market.

In a bid to combat these challenges, the aerospace industry has united to lobby the Trump administration for exemptions and tariff relief. Executives are expressing a mix of realism, optimism, and frustration, sharing candid insights into the current landscape. Their views range from the belief that tariffs defy common sense to the notion that these levies are merely the opening gambit in a complex game of global trade chess.

Industry Leaders Speak Out

Guillaume Faury, CEO of Airbus, emphasized the paradox of tariffs: “Indeed, we are buying a lot from the US. We are selling to the US, we manufacture, we assemble, we develop in the US like few other companies… and we believe tariffs in this industry would be lose-lose.”

Delta CEO Ed Bastian echoed these sentiments, stating, “The one thing that you need to know we are very clear on is that we will not be paying tariffs on any aircraft deliveries we take… If you start to put a 20% incremental cost on top of an aircraft, it gets very difficult to make that math work. We’re acting as if we’re going [into] a recession… If [trade policy uncertainty] continues, and we don’t get resolution soon, we will probably end up in a recession.”

Southwest CEO Bob Jordan bluntly remarked, “I don’t care if you call it a recession or not — in this industry that’s a recession.”

American Airlines CEO Robert Isom expressed his concerns about rising costs: “Aircraft cost too much already. I don’t want to pay any more for aircraft. It doesn’t make sense. And certainly, we’re pulling guidance. This is not something we would intend to absorb, and it’s not something that I would expect our customers to welcome.”

Ryanair CEO Michael O’Leary hinted at potential delays, stating, “If tariffs are imposed on those aircraft, there’s every likelihood we may delay the delivery… We might delay them and hope that common sense will prevail.”

United Airlines CEO Scott Kirby offered a more measured perspective: “We should all take a breath; we’re not to the end state yet… I was not surprised at a large tariff… it was just the first move of the chess game, and there are a lot of moves left to come.”

Boeing CEO Kelly Ortberg focused on the broader implications, noting, “The bigger issue is making sure that our supply chain stays healthy, and we continue to see the supply chain making the deliveries and the tariff environment doesn’t slow things down in the supply chain.”

A Call for Clarity

As the aviation industry grapples with these challenges, the call for clarity and resolution grows louder. Executives are urging the administration to reconsider the impact of tariffs on an industry that is vital not only to the economy but also to global connectivity. With uncertainty looming, the aviation sector remains on high alert, navigating through turbulent skies in hopes of a smoother flight ahead.