Aerospace Faces Trade Challenges as EU Considers Tariffs
By Tim Hepher, Allison Lampert, Joanna Plucinska and Dan Catchpole
PARIS (Reuters) -Aerospace firms sought to contain a minefield of pressures on Thursday after an Airbus-led body urged the European Union to hit back against U.S. President Donald Trump's tariffs and one of Europe's biggest airlines warned of higher fares.
Aircraft, engines, spare parts and components from landing gear to seats face higher costs and planning for the peak summer travel season could be disrupted as Brussels mulls a response, industry experts warned.
"It will be chaos. It creates massive demand uncertainty as airlines plan their network schedules," Rob Morris, global head of consultancy at UK-based Cirium Ascend, said.
Trump on Wednesday imposed sweeping tariffs on U.S. imports including 20% on EU goods and 10% on imports from Britain, home to engine maker Rolls-Royce.
The move went further than many investors and executives had expected, rattling a $150 billion-a-year jet industry that is an important contributor to the global economy.
Dominant planemakers Airbus, headquartered in France, and its U.S. rival Boeing have been a lightning rod for trade tensions for years, waging a subsidy dispute at the World Trade Organisation led by their governments for 17 years until a five-year truce was declared in 2021.
But with supply chains still not fully recovered from the COVID-19 pandemic, insiders say both companies are reluctant to put fragile efforts to rebuild the industry at risk by fuelling a wider trade war.
France's aerospace industry has written to the European Commission calling for "proportionate and assertive" countermeasures if the new U.S. tariffs cause significant damage, a person familiar with the matter said.
But the appeal from the country's powerful Gifas aerospace lobby, whose rotating presidency is held by Airbus, also calls for any retaliation to be fine-tuned so as to avoid hurting European companies that rely heavily on U.S. imports.
Gifas did not respond to a request for comment. The European Commission referred to a statement by its president Ursula von der Leyen, who said the EU was prepared to respond with countermeasures if talks with Washington failed.
The tone of the letter - juggling retaliation with softening the impact on local importers - reflects France's position at the centre of an interlocking supply chain for jets and engines.
Analysts said it seemed aimed in part at tempering the impact of tariffs on the engine industry, which relies as much on transatlantic cooperation as the planemakers thrive on rivalry.
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Toulouse-based Airbus is France's second-biggest exporter after the agri-food sector and vies for sales with Boeing.
But France also sits at the heart of the world's largest engine maker by volume, CFM International, a 50-year-old transatlantic venture that has stayed below the trade radar.
Co-owned by France's Safran and GE Aerospace, CFM is among the biggest suppliers to Airbus and Boeing.
Airbus is also a major customer of Pratt Whitney, the engine maker owned by U.S. aerospace group RTX, which in turn cooperates closely with Germany's MTU.
Boeing, meanwhile, imports some engines from Rolls-Royce as well as European parts for the engines on its 777 jet.
None of the companies had any comment on tariffs.
Analysts said any tariffs would feed into all airplane costs via engine supply chains, even without an expected EU response.
"If tariff wars spread to aircraft or aircraft parts, then clearly it will lead to higher costs for our airline and higher fares for our customers," Michael O'Leary, CEO of budget giant Ryanair, told Ireland's Newstalk Breakfast.
Jetmakers had previously seemed confident that planes would be left out of the new trade conflict, with O'Leary declaring tariffs unlikely after meeting a top Boeing executive last week.
Boeing CEO Kelly Ortberg told a Senate panel hours before Wednesday's announcement that it was important Boeing did not "get in a situation where certain markets become closed to us."
Boeing typically delivers 17% of its jets to Europe while Airbus delivers some 12% to the United States, some of which are assembled locally, according to Boeing and Cirium data.
(Reporting by Tim Hepher, Allison Lampert, Joanna Plucinska, Dan Catchpole. Editing by David Evans, Mark Potter and Nia Williams)
