Aviation companies in the United States have been pushing the White House to restore the tariff-free policy they once enjoyed under the 1979 Civil Aircraft Agreement. The call for action comes as President Donald Trump’s trade policies and weaker travel demand place financial pressure on airlines, manufacturers, and suppliers. In a report from Reuters, industry leaders recently met with senior officials, including President Trump, to request an exemption that would protect the sector’s $75 billion annual trade surplus. The imposed tariffs ended decades of duty-free benefits the industry had relied on.
American Airlines CFO Devon May shared the company’s ongoing efforts, stating, “Our government affairs team is hard at work on it to make the case as to why there should be a carve-out.” This push for an exemption aims to help companies manage costs during a period of falling travel demand, as consumers grow more cautious due to economic uncertainty and rising inflation.
Airlines Struggle to Manage Costs Amid Falling Demand
In response to softer bookings, airlines have been cutting flights and withdrawing financial forecasts. Companies have been working to control expenses and maintain margins by resisting price increases from aircraft manufacturers and engine suppliers, who are trying to pass on the additional tariff costs.
Executives have considered returning leased planes and postponing aircraft deliveries to limit expenses. May pointed out, “It’s really difficult for us to wrap our heads around paying tariffs on those airplanes. It just doesn’t make economic sense.”
Suppliers of planes and jet engines have also been assuring shareholders that they will not absorb the added costs, a situation that has created tensions with airline customers. Boeing expects its annual tariff costs to stay under $500 million. Meanwhile, GE Aerospace predicts more than $500 million in tariff expenses, and RTX expects about $850 million in added yearly costs. All three companies plan to use cost control strategies, including price adjustments and leveraging large backlogs of orders.
GE Aerospace CEO Larry Culp cautioned airlines against delaying deliveries, noting, “There are plenty of other people who will step up in line and take their place.” American Airlines had 14 aircraft scheduled for delivery this year from Airbus and Embraer by the end of March. Some of these jets, including Airbus’ A321 XLR, built in Europe, are expected to face tariffs.
May explained the financial strain tariffs would cause, saying, “It’s just really difficult for us to imagine paying another 10% or something higher than that on airplanes, which are our biggest capital cost.” Similarly, Delta Air Lines said it does not agree to pay tariffs on incoming aircraft, warning that it would disrupt their cost structures. Even planes assembled in the United States face levies because manufacturers import many parts from abroad. Boeing has been paying 10% duties on parts sourced from Italy and Japan, and United Airlines CEO Scott Kirby noted that Airbus is paying tariffs on planes assembled in Alabama.
Economic Pressure Adds to Airlines’ Challenges
Weakening demand has added to the burden. Airline executives mentioned that if travel demand had remained strong, handling the tariffs would have been easier. However, a slowdown over the past two months has hurt pricing power across the market. Data from the U.S. Labor Department showed that March experienced the steepest monthly decline in airline fares since September 2021. Airlines have been cutting ticket prices to encourage travel.
Alaska Airlines CFO Shane Tackett told Reuters that most bookings are coming in at lower fare levels. “That is something that we believe every airline has ultimately been dealing with,” he explained. American Airlines also confirmed that it does not plan to pass tariff costs onto customers by raising fares.
GE Aerospace added that aircraft departures in North America are expected to decrease following reductions in flight schedules. This region represents 25% of global traffic, and a decrease in departures can impact their aftermarket services business. The company noted that it typically sees the effects of fewer departures about four quarters after schedule cuts begin.
Industry Officials Make Their Case in Washington
Despite the White House’s position that large trade deficits have weakened the nation’s manufacturing sector, aerospace leaders argue their case is different. They emphasized that their industry exports over $135 billion of goods annually and that a majority of their manufacturing operations and workforce are based in the United States.
Larry Culp recently discussed the topic with President Trump, explaining how maintaining duty-free status has helped the sector achieve the strongest trade balance of any industry. He said his company’s position was “understood” but acknowledged, “it’s not the only item they’re solving for.” Culp added, “I have argued that it was good and would be good for the country.”
As companies wait for a final decision, the aviation sector continues to face tariff challenges, softening travel demand, and the need to manage growing costs carefully.
