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Safran is rearranging part flows for CFM International Leap engines to ease the burden of U.S. tariffs.
Just as European aerospace begins to see credible signs of recovery in its long-troubled supply chain, new uncertainty is hitting the sector. Will the threat of U.S. tariffs and retaliatory action by the EU derail the process and put planned production increases in doubt again?
When industry meets at the 2025 Paris Air Show, there likely will be no answers yet, with deadlines constantly moving. Only a day after U.S. President Donald Trump had threatened to escalate tariffs on EU goods to 50%—25% in the original plan and currently 10%—he suspended them until July 1, pending a negotiated settlement that might include aerospace tariffs. The EU has a detailed plan to retaliate against tariffs that targets a broad range of aerospace products, such as completed aircraft and many smaller components manufactured by U.S. suppliers.
- Delivery delays and trade uncertainty persist ahead of Le Bourget
- European manufacturers implement mitigation strategies
Dealing with trade issues is a huge complication for European aerospace companies. “The supply chain has progressively recovered,” Safran CEO Olivier Andries says. “We were getting to a situation where we were close to normalization at the end of last year.”
But that could change again. “We see some signals from suppliers telling us, basically, that they have inflationary costs because of the tariffs and that they would like us to absorb the extra cost, some of them threatening to stop deliveries,” Andries says. Therefore, he explains, Safran is “monitoring the situation very carefully” as it “creates a new element of potential disturbance in the supply chain.”
Andries is not the only one who is worried. The levies “are adding complexity and remain uncertain in terms of implementation, scope and duration,” Airbus CEO Guillaume Faury says. He deems even the current 10% imposed “significant.”
At the other end of the airframer spectrum, Deutsche Aircraft co-CEO Nico Neumann concurs that parts of the supply chain may suffer, and manufacturers could feel the effects down the line.
On the other hand, Bank of America analyst Ron Epstein says he expects the tariff impact “will be significantly more manageable than expected around two months ago.”
If so, that would be in part due to the creativity of Europe’s aerospace companies in circumnavigating tariffs. For example, Airbus delivered an A350 to Delta Air Lines in Japan. Operating only international routes, the aircraft will not be formally imported into the U.S. for the time being. Part imports to feed the Airbus final assembly line in Mobile, Alabama, and for aircraft delivered to U.S. airlines are subject to the 10% tariffs.
“We are optimizing logistical flows,” Andries says. “Any time we can change the flow, we go directly from Country A to Country B without stopping by the U.S. if it is not necessary.” Whatever net exposure remains will have to be covered by customers, he notes. “We will apply a tariff surcharge, and we won’t be shy,” he says. “At the end of the day, the tariff situation is creating inflation. So be it.”
MTU Aero Engines is applying similar tactics. Low-pressure turbines made in Poland for assembly in Pratt & Whitney PW1100G engines are no longer shipped to the U.S. but straight to Munich, where MTU operates its own final assembly line for the engine type. The company also is trying to build up alternative sources for nickel and titanium outside the U.S. According to CEO Lars Wagner, MTU is shifting flows to and through tariff-free bases. One option he mentioned is exporting more from its facilities in China, since they are protected by that country’s tax-free regime.
Wagner says it is “highly unlikely” that MTU would set up alternative sites, as that would take considerable time and investment. Changing MTU’s own supply chain would take 3-5 years, he estimates. Tariffs are covered in some contracts with its customers, meaning that the company is protected, but they are excluded in others.
For now, production increases are proceeding as planned, although they are not linear. Airbus in particular has suffered in the first few months of the year and is building up sizable A320neo inventory, as CFM International has shifted more Leap-1A production to airlines and the aftermarket rather than the final assembly lines in Toulouse and Hamburg. Andries says the situation will normalize over the coming months, allowing Airbus to equip the half-finished aircraft with engines and deliver them to customers.
Safran expects Leap production to grow 15-20% this year. Airbus expects to hand over 820 aircraft in 2025, up from 766 last year.
Some of this—and in particular Airbus’ ability to execute on its longer-term growth plan—will depend on its integration and turnaround of Spirit AeroSystems units. The closing of the long-anticipated deal is expected in the third quarter. Spirit’s financial and operational issues have hampered output growth on the A220 and A350 programs.
According to a definitive takeover agreement published in late April, Airbus will buy Spirit sites in Kinston, North Carolina; Wichita; Saint-Nazaire, France; Casablanca, Morocco; Belfast, Northern Ireland; and Prestwick, Scotland. The facilities build A350 fuselage sections; A321 and A320 components; A220 pylons, midfuselage and wings; and A220 and A350 wing components.
Spirit will pay Airbus $439 million in compensation, which should largely cover the negative cash flow the airframer anticipates this year. Airbus Chief Financial Officer Thomas Toepfer expects the Spirit turnaround to take around three years and to cause a “mid-triple-digit million” negative cash flow during 2026-27.
But the move could be worth the investment. Airbus has committed to building 14 A220s per month starting next year, 75 A320neo-family aircraft per month beginning in 2027 and 12 A350s monthly as of 2028. The company needs to meet these targets to avoid further clashes with a highly frustrated customer base waiting for much-delayed aircraft.
In the traditionally weaker first part of the year (January-April), Airbus delivered 192 aircraft, including a monthly average of just over 37 in the A320neo-family, well below its overall 2024 levels. The A220 came in at a monthly rate of six deliveries, slightly lower than the overall average for 2024. Last year, Airbus also delivered just fewer than five A350s per month. In the first four months of 2025, that number dropped to just over three.
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