BETA
This is a BETA experience. You may opt-out by clicking here

More From Forbes

Edit Story

Delta Looks To Alabama For Airplanes With No Tariffs

Following
This article is more than 4 years old.


The Airbus plant in Mobile Ala., five years old in September, is having a moment.

The plant, which now produces five aircraft a month – headed for six in January – is an apparent beneficiary of this month’s World Trade Organization to impose tariffs on Airbus.

That’s because the airplanes Airbus assembles in Mobile will likely be exempt from the World Trade Organization’s move this month to annually impose tariffs of $7.5 billion on European Union goods. The WTO found years of European loans and illegal subsidies to Airbus.

The Mobile plant produces A320 family aircraft, with A220 production scheduled to begin soon. Customers include Atlanta-based Delta as well as American, JetBlue, Hawaiian and the three U.S low-cost carriers: Allegiant, Frontier and Spirit. The plant employs about 1,000 people.

 “Certainly, Mobile is going to be very important for us going forward,” CEO Ed Bastian said Thursday on the Delta third quarter earnings call.

“That's going to be the focus of our domestic strategy to be getting our 220s, our 321s via Mobile as Airbus continues to ramp up that production capability,” Bastian said. “I'm not going to get into any longer-term ideas we have because obviously it doesn't necessarily help you on the widebodies, but we're evaluating options there. And as I said, our goal is to mitigate any potential tariff exposure.”

Delta, which has about 170 Airbus aircraft on order, said last week that the tariffs would “inflict serious harm on U.S. airlines, the millions of Americans they employ and the traveling public.”

Bastian said Thursday, “This is kind of a retrospective tariff on the decisions taken in the past.

“We do not expect the cost to incur any cost of tariffs through the end of this year,” he said. “We are expecting some deliveries out of Mobile in terms of 321s and those do not carry a tariff. And looking forward, we're examining our options next year to make sure that we mitigate any increase to the prices that we had already negotiated with Airbus.”

Airbus spokesman Clay McConnell said, “In terms of tariffs, as it stands now, Airbus’ Mobile manufacturing facility is not affected in the immediate term. 

“In the longer term, it’s not yet fully clear,” McConnell said. “We remain hopeful that [the United States Trade Representative] will not impose tariffs on other goods in the future, including components destined for Airbus’ Mobile factory. Clearly, U.S. manufacturing – such as what Airbus does in Mobile and elsewhere in America – is an important contributor to local economies and the overall U.S. economy.”

Richard Aboulafia, an aerospace consultant with the Teal Group, said the Airbus establishment of a plant in Mobile represents “a Southern strategy” that now is proving to be successful.

 “Using a Southern strategy to blunt an anti-trade initiative is brilliant,” Aboulafia said. “It’s genius.”

Aboulafia said that even as Deep South states such as Alabama back President Trump’s pro-tariff trade war strategies, they see their economic interests served by exemptions from tariffs for a European company’s Alabama plant. “In Alabama, Airbus hedged against the possibility of an anti-trade government,” he said.

It remains unclear what Bastian views as options in terms of widebody orders, since Airbus does not assemble widebody aircraft outside Europe. A Delta spokesman declined to elaborate.

Aboulafia questioned what Delta’s widebody strategy might be.

“It’s physically a lot more difficult” to establish a new widebody assembly plant, he said, noting that Boeing’s Charleston, S.C. plant, which makes 787s, is “the world’s only secondary twin aisle assembly plant.”

Follow me on Twitter or LinkedIn