With the MAX certified to fly by the FAA, it’s only a matter of time before Boeing can resume delivering its narrowbody around the world. But with new EU tariffs inflating the cost of these aircraft by 15%, Boeing faces an uphill battle to get aircraft to its big European customers. Eddie Wilson, CEO of European low-cost carrier Ryanair, believes that Biden’s arrival could be the change the relationship needs.
A reset of the relationship
Mid-October, just weeks before the US presidential election, saw the WTO authorizing Europe to stick $4bn worth of tariffs on imported US goods. The imposed tariffs added 25% to a range of agricultural and industrial products and, crucially, 15% on imported aircraft.
For Boeing, sitting on a stockpile of several hundred 737 MAX, many of which were destined for Europe, this was an unwelcome turn of events. Adding 15% to the cost of aircraft purchases was unlikely to go down well with its customers, one of the biggest of which is European low-cost airline Ryanair.
Speaking at CAPA Live recently, CEO of Ryanair DAC Eddie Wilson said that he sees the change of president in the US as something that could undo the damage done over the last four years to the US-EU friendship. He said,
“I think now with a president-elect Biden is reaching out to Europe, I think we’re going to have a completely different relationship.”
He mentioned Biden’s ‘cozying up’ to European nations, referencing the US president-elect’s European phone calls on November 10th. Biden had spent some time chatting with European leaders, including the French President, the German chancellor and the Irish Prime Minister. Wilson sees this reaching out as a sign of things to come.
“I think that’s going to seep down through into a reset on the relationship. And I think we would expect to find that throwing bottles at one another isn’t the way to go about things. These are the two main aircraft manufacturers in the world, and they’re going to compete on an even footing, as they have been for many years,” he said.
Won’t be paying
With 135 Boeing 737 MAX on order, Wilson is keen to avoid seeing the prices jacked up by 15%. While Ryanair likely got a great deal on such a large aircraft order, an additional 15% on top of the agreed price could see the cost inflated by as much as $2 billion. Wilson was adamant that the airline hoped to see a scrap of the tariffs but was clear that Ryanair wouldn’t be bearing the brunt of the charges if it didn’t. He said,
“I think our belief is that it will be reset. And we won’t be paying if it isn’t.”
With the MAX now cleared to fly, Ryanair is edging closer to getting its MAX 8-200 certified and ready to deliver. Clearly, Wilson is hoping for a change in policy pretty soon or is confident that Boeing will pick up the tab.
Wilson’s positive tone is a sentiment that is echoed on both sides of the Atlantic. Many business leaders believe the tariffs are counterproductive and hope that Biden’s arrival will signal a defrosting of the relationship between the two markets. With economies reeling from the pandemic, this could be a good time to revisit Obama’s free trade agreement.
However, EU Vice President and foreign affairs chief Josep Borrell spoke to TIME about the situation and believes that history cannot be so easily rewound. The four years of President Trump, who believed the EU was a ‘foe’ and pushed through the tariffs on European goods, has left a bitter taste in the mouth. Borrell said,
“Trump has been a kind of awakening. And I think we should stay awake. We cannot say ‘oh Trump is no longer there, we can go back to our previous state of mind.’”
For the time being, we’ll have to wait and see what Biden’s move is. The president-elect has a great deal on his plate, and whether protecting Boeing from harmful EU tariffs is high on his agenda remains to be seen. But a scrap of the tariffs in both directions could be the relief both planemakers need as they come out of this crisis.