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The Airline Industry Takes a Hit in the US’ Trade War

The Airline Industry Takes a Hit in the US’ Trade War
Taylor Rains

The ongoing trade war between President Trump and the European Union is heating up, and the airline industry is taking a hit.

The World Trade Organization just approved Trump’s proposed tariffs on $7.5 billion worth of EU luxury goods and aircraft parts, making it the largest approval in WTO history and further intensifying the tension between the U.S. and the bloc. “In 2004, the EU was accused of providing financial aid to Airbus to gain an advantage over competitors. WTO looked into the accusations and ruled Airbus had received illegal subsidies from the EU by accepting aid during the manufacturing of the A350 and A380 wide-body jets. This tariff decision was in response to the ruling.”

U.S. airlines will feel the worst burn from this approval as the cost to purchase Airbus aircraft will skyrocket. Collectively, U.S. airlines have over 500 unfulfilled Airbus orders that may be affected, leading investors to become worried about their growth. Due to the concern that these tariffs may lead to industry layoffs, airlines have asked the U.S. government to block the proposed increase.

Not only are airlines being affected by the WTO’s approval, but rival aircraft manufactures, Airbus and Boeing, also took a hit, with both of their stocks decreasing by at least 2.5%.

The European Commissioner for Trade, Cecilia Malmstrom, explained that if this tariff were to be imposed on the EU, it would be “short-sighted” and “counterproductive”. She further stated, “if the U.S. decides to impose WTO authorized countermeasures, it will be pushing the EU into a situation where we will have no other option than to do the same.”

As of October 2nd, Alaska, American, Delta, JetBlue, Southwest, Spirit, and United have all seen a stock drop of at least 3%, with United and Delta experiencing the worst plummet of about 6%.

View Comments (9)

9 Comments

  1. 84fiero

    October 7, 2019 at 10:38 am

    This isn’t “Trump’s trade war against the EU” but rather stems from a WTO case that began in 2004. The WTO ruled against the EU for its illegal subsidies to Airbus in 2018 and these tariffs are in response to that verdict.

    A separate WTO case brought against Boeing was decided in the EU’s favor and the WTO should be announcing the allowable tariffs that the EU can impose against the US. It’s almost certain the EU will impose tariffs on the US – and would do so regardless of this action by the US.

    The two parties are most likely headed into negotiations to settle both aspects. This is the first volley in a process.
    Which will take some time, but regardless the sky isn’t falling.

  2. Superjeff

    October 7, 2019 at 11:16 am

    I don’t understand the hit to United’s share price as they haven’t ordered many Airbus airplanes in quite a while. Not sure about their A350’s which are on order, though. Delta, on the other hand, has a boatload of Arbii coming, but, even there, they’ve agreed on pricing already.

  3. jrpallante

    October 8, 2019 at 12:15 am

    Right on 84fiero! Thanks for introducing the facts that are routinely lacking in on-line “news” reports. Does anybody research beyond last week?

  4. Taylor Rains

    October 8, 2019 at 6:12 pm

    84fiero, thank you for filling in the gaps in my article. I realize i left out that crucial information and appreciate the feedback!

  5. woggledog

    October 9, 2019 at 1:25 am

    Delta’s purchase of the above pictured jet, the A220, appears to be a bit of a masterstroke, given that many of the components are sourced in the US, and that Airbus have plans to make it down in Alabama. Of course, they are on the hook for all of the other airbus jets they have on order…

  6. CEB

    October 9, 2019 at 8:40 am

    Taylor Rains, so why not correct your post and in particular its inflammatory title? Burying your response in the comments is disingenuous.

  7. Taylor Rains

    October 9, 2019 at 12:47 pm

    Hi CEB, I am planning on changing it (it takes some time as I cannot control the content on my end and I do not make the titles, so I have to go through FT to get it changed). I wasn’t trying to hide in the comments but address the concern and acknowledge my error. Thank you!

  8. alexmyboy

    October 10, 2019 at 4:52 am

    Are we winning yet?

  9. ulxima

    October 11, 2019 at 11:39 pm

    Thumbs up to Taylor for engaging with us.
    I would like to see others doing the same.
    Well done!

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