By Allison Lampert and Dan Catchpole
(Reuters) – Tariffs imposed by the U.S. and other countries in retaliation have prompted some business jet buyers to try to rush deliveries or add contract clauses to protect themselves from the duties, as the aviation sector braces for higher costs of planemaking materials, industry experts said.
Canada and the European Union hit back on Wednesday with retaliatory duties against the United States after the White House introduced 25% tariffs on all imported steel and aluminum, metals, which are used to make planes.
The U.S. may impose additional tariffs in April on Mexico and Canada.
Makers of private or business jets, such as Canada’s Bombardier, General Dynamics’ Gulfstream Aerospace and Textron, have seen their order backlogs grow on demand from wealthy travelers and corporate clients.
While commercial planemakers such as Boeing and Airbus, and large aerospace suppliers, have not warned of any major impact on aircraft production and deliveries, tariffs that have pressured financial markets are creating uncertainty for investors and buyers.
Bombardier did not provide guidance this year due to the tariff threat, while some trade groups have flagged concerns that a drawn-out trade war would hit a globally integrated aerospace supply chain.
Amanda Applegate, a partner at Soar Aviation Law, said she has seen some buyers of non-American private jets located outside the country add clauses to protect themselves from higher costs if their purchases get hit with tariffs.
Others are trying to close deals quickly, before further tariffs hit. One European buyer of a U.S. private jet has been trying to rush a transaction, said Katie DeLuca, a partner at Florida-based law firm Harper Meyer.
“That is what I’ve been seeing in that area, that rush transaction, get it exported, get it into Europe before a potential issue will arise,” DeLuca told a Tuesday webinar held by the National Business Aviation Association.
DeLuca added she has also seen a transaction in which a U.S. buyer tried to terminate a deal with a non-U.S. seller for a used Canadian aircraft based abroad.
A Bombardier spokesperson said its parts are distributed from Chicago and its planes can be delivered to customers in the U.S. without incurring tariffs in the world’s largest market for private planes, as the company is compliant with the U.S.-Mexico-Canada trade deal.
A U.S. tariff exemption on USMCA-compliant goods from Mexico and Canada is set to end in April.
PARTS COSTS
The Aerospace Industries Association and a coalition including U.S. airlines and business jet manufacturers have raised alarm over tariffs hitting the industry’s supply chain, which produces critical parts.
“It is essential that both government and industry work together to minimize cost and availability disruptions in the aviation supply chain, which in many cases cannot be easily or quickly addressed,” the coalition said.
Airbus CEO Guillaume Faury told a French TV program on Tuesday he is starting to see disruption in the European planemaker’s supply chain, without offering details.
However, five U.S. commercial aerospace suppliers told Reuters they have not seen any or significant price increases due to tariffs, or the threat of tariffs. Two said they order materials as much as six to 12 months ahead of time, and have seen no noticeable price fluctuation on aluminum or steel.
One supplier said his Seattle-area company is not changing its business plans for now, because it does not expect the tariffs to last.
Aengus Kelly, CEO of the world’s largest aircraft leasing company AerCap, warned on Wednesday on CNBC that the price of a Boeing 787 plane could increase by $40 million in a worst-case scenario due to the tariffs. Boeing had no immediate comment.
(Reporting By Allison Lampert in Montreal and Dan Catchpole; Editing by Rod Nickel)
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