IATA’s Walsh Sees Differentiated Impact Of Tariffs

ATHENS—Airlines will not take delivery of aircraft at significantly higher costs created by tariffs, IATA Director General Willie Walsh said.

“Nobody wants to pay more for aircraft, and the aircraft have always been exempt from tariffs going back to the late 1970s,” Walsh told Aviation Week on the sidelines of the CAPA Centre for Aviation Airline Leader Summit in Athens, Greece. “I think the issue that people are facing is, you buy an aircraft, you order an aircraft five years ago at an agreed price, with escalation, and then all of a sudden, something that was never anticipated gets thrown into the mix. First thing [that happens], people are not taking the aircraft.”

Walsh believes that most airlines would be able to reject deliveries even if tariffs are not excluded in the original contracts. “Given that the [manufacturers] are significantly late in delivering the aircraft, I would imagine that they are already in violation.”

Walsh said that airlines are in favor of tariff-free aircraft manufacturing. “I’m not aware of anybody who wants to see a move away from that,’ Walsh said. “Nobody wants to see added complexity and unnecessary costs.”

Aircraft are included in the current 10% tariffs on all goods imported to the U.S. and, failing an agreement with other countries after the 90-day pause, the levies could be even higher. The U.S. and the UK reached a trade agreement on May 8. International Airlines Group (IAG) announced a large order for 32 Boeing 787-10s on May 9. The European Commission threatened to retaliate with its own tariffs on U.S. goods, including on aircraft and aerospace components, should the dispute with the U.S. Trump administration not be settled before the grace period expires.

However, Walsh noted that aircraft tariffs could also have some indirect positive effects. “The immediate impact of that would be to see less capacity in the market,” he said. “In an environment where some people think demand may be softening, less capacity coming into the market is a positive.” A more general slowdown would lead to lower fuel price, which would benefit the airlines on the cost side. “The other impact of that is you continue to operate [older] aircraft for longer,” Walsh said. “That’s a negative because they are less fuel efficient, more costly.”

And while the industry saw evidence of companies shipping goods in anticipation of tariffs, cargo would be impacted negatively if tariffs were to stay, Walsh said. “E-commerce with the elimination of the de minimis rule will have an impact,” Walsh said. “So, there’s going to be some negatives.”

More broadly, Walsh believes it will “take months to get greater certainty” on the future trade environment. “I don’t think there’s anybody that can tell you what’s going to happen over time. [U.S. President Donald Trump] clearly made some statements, introduced things and then reversed them. That has added to a lot of uncertainty.”

But “he is promoting and provoking a reset of global trade. And in his mind, he’s doing that reset to benefit the U.S. economy. It’s having a global impact. And in many cases, I see that being very positive for the rest of the world,” Walsh argued.

“If you look at it from an aviation point of view, new markets are going to open up that have traditionally not been there,” he pointed out. Also, “I think it is promoting greater competitiveness in other parts of the world. Because maybe some of what Trump says is right, maybe people were getting lazy about trading with the U.S. They are going to have to start looking at things in a different way. So, a reset like that isn’t necessarily a negative.”

For example, “trade that China is doing with the U.S., they’re going to do with other parts of the world. There will be countries that will want to do the trade with China.”

Walsh had told CAPA delegates May 8 that he expects 2025 industry profits to be roughly in line with 2024 results but 2026 could become more difficult in light of the trade environment.