Jan. 6, 2020, © Leeham News: This may be the year that Airbus is hit with the negative consequences of the Boeing 737 MAX crisis.
Most observers see Airbus benefitting with greater A320 family sales while the MAX remains grounded.
In LNA’s 2020 Outlook last week, we pointed out that the long-running trade war between the US and European Union could be coming to a head this year. Airbus and the EU are waiting for the World Trade Organization’s authorization to impose tariffs on US products. This decision is expected in May or June. Boeing is expected to be the first target. The Trump Administration last year imposed a 10% tariff on Airbus aircraft.
The MAX crisis could ratchet up tariffs on Airbus aircraft.
As 2019 ended, LNA began hearing some ominous reports from multiple sources about what’s coming this year.
As EASA flexed its muscles during the unfolding MAX crisis, in which the Federal Aviation Administration’s deference to Boeing became an issue, some wondered if there was some payback for the Trump trade war and tariffs on Airbus.
Independent observers say this isn’t the case. EASA, they say, is genuinely upset at having relied on the FAA (per standard practice for decades), but learning of the shortcomings as more and more authority was turned over to Boeing.
Some at Boeing wonder if EASA is being egged on by Airbus. Airbus says this isn’t the case and the MAX crisis is bad for the industry.
The MAX was grounded globally March 13. The FAA was the last to ground the airplane. EASA grounded it the day before. Airbus was quick, publicly and privately, express concern of the impacts as certification processes headed toward breakdown. This position was later echoed by IATA, airlines and others.
At the time, Airbus had not yet certified the A330-800. The A321XLR was launched at the Paris Air Show in June and will face certification for a 2023 planned entry into service.
China was first to ground the MAX, a move some suspected was politically motivated due to trade wars. We’re told CAAC, the Chinese regulator, was afraid a Chinese pilot would be the next to encounter an MCAS malfunction. (China hasn’t ordered a Boeing airplane since 2017 and hasn’t taken delivery of 787s; this is the clear retaliation for the Trump trade wars.)
Regardless of EASA’s motives, we’re told the Trump Administration is unhappy and is waiting until the MAX is recertified to retaliate.
The EU requested 1.5m pages of documents and wants data on sales for the last 20 years, Reuters reported last month. The EU previously said it suspended review because Boeing hadn’t produced information.
All but two of 10 regulators approved the proposed joint venture between Boeing and Embraer. Approval by the ninth is expected soon. This leaves just the EU.
The Trump Administration views the EU’s delay and requests a direct result of the trade disputes that include but extend beyond Airbus.
And it’s not happy. As with the MAX, we’re told the Administration is prepared to retaliate once the JV is approved—if not before.
It’s LNA’s analysis that Airbus could get caught up in this as well, since Boeing is involved.
As we wrote last week, this is an election year and Donald Trump is running for reelection. Upping the ante in the European trade wars will make him look tough to his base. Never mind that the Federal Reserve concluded the trade wars are hurting the US economy, businesses and workers.
Airbus is almost certain to become a target for higher tariffs. I won’t rule out adding the Mobile (AL) final assembly line to sanctions despite Alabama being the No. 1 supporter of Trump. There is no way Alabama will vote for a Democratic challenger to Trump; it’s a completely safe state.