Boeing Prices May Soar Amid Tariff Tensions
During a recent interview on CNBC’s Squawk Box, AerCap CEO Aengus Kelly warned that a worst-case tariff scenario could send Boeing aircraft prices skyrocketing by as much as $40 million per unit. Kelly explained that if tariffs were to increase by 25% across the board in a tit-for-tat trade escalation, the cost of a Boeing 787 could jump by an additional $40 million, a figure that would make airlines think twice before purchasing the aircraft. In such a scenario, most carriers would likely turn to Airbus, potentially allowing the European manufacturer to capture between 75% and 80% of the global market share, as the steep price increase would be difficult to justify in a competitive environment.
Kelly’s comments come amid rising trade tensions that have already affected the global economy. The recent implementation of a 25% tariff on steel and aluminum imports has triggered swift countermeasures from the European Union, creating uncertainty for aerospace manufacturers. While it is still too early to determine the full impact of these tariff pressures, the prospect of a significant cost increase for Boeing aircraft has prompted serious concern among industry leaders.
Despite the challenges posed by escalating tariffs, Kelly noted that AerCap has observed a marked improvement in the quality, reliability, and safety of Boeing products over the past couple of years. As the world’s largest aircraft leasing company, AerCap recently purchased 150 aircraft, helicopters, and spare engines from Boeing, demonstrating its continued confidence in the manufacturer. Kelly emphasized that the enhancements in Boeing’s manufacturing process have been substantial. “Boeing has made tremendous steps in terms of quality, safety and reliability over the last year,” he said, adding that he has “never had a hesitation” about getting on a Boeing aircraft, thanks to the improvements he has witnessed firsthand on the shop floor.
Looking ahead to 2025, Kelly stressed that Boeing needs to ensure it has adequate cash flow to deliver aircraft reliably, particularly in an industry facing potential economic headwinds. Although there are growing concerns about an air travel recession and weaker demand—as reflected in recent earnings reports from major carriers like Delta Air Lines—Kelly remains bullish on the long-term prospects of the aviation market. He attributed the current “soft patch” in demand primarily to labor cost challenges rather than a fundamental decline in air travel.
The potential for a $40 million price increase on a Boeing 787 under a worst-case tariff scenario is a stark reminder of the complex interplay between international trade policies and the aerospace industry. This development could have far-reaching consequences, not only in terms of aircraft affordability but also in shifting market dynamics in favor of competitors like Airbus. As the global aviation landscape continues to evolve amidst trade uncertainties, industry stakeholders will be closely monitoring how these tariff pressures influence purchasing decisions and leasing strategies. In the meantime, Boeing’s recent improvements in production quality and operational reliability offer a measure of reassurance, even as the company navigates an increasingly challenging economic environment.
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Sources: AirGuide Business airguide.info, bing.com, cnbc.com