European budget airline Ryanair threatened to cancel hundreds of orders of Boeing aircraft amid tariffs imposed by the United States, which have driven prices higher and is considering alternative suppliers, including Chinese planemaker COMAC.
The news agency Reuters first reported the story on Thursday.
The airline had ordered 330 Boeing 737 MAX aircraft – at a list price of more than $30bn.
Ryanair’s chief executive Michael O’Leary said in a letter to an undisclosed senior US lawmaker “If the US government proceeds with its ill-judged plan to impose tariffs, and if these tariffs materially affect the price of Boeing aircraft exports to Europe, then we would certainly reassess both our current Boeing orders, and the possibility of placing those orders elsewhere,” Reuters reported.
The threat by Europe’s largest low-cost carrier, and one of Boeing’s biggest customers, was the latest sign of a potential reordering of the global aerospace industry if Trump does not exempt the sector from his tariff plans.
The letter, seen by Reuters, was a response to a warning by US Representative Raja Krishnamoorthi, a Democrat from Illinois, about the security implications of Ryanair following through on an earlier suggestion it might consider a COMAC order.
But with COMAC not yet certified in Europe, and Boeing’s main rival Airbus saying it is sold out through the rest of the decade, Ryanair may find it hard to follow through on its threat, one industry source told Reuters.
Escalating tensions
O’Leary’s letter is an escalation from a previous threat in April, in which he said that the airline would delay deliveries.
In March, he said that Boeing executives had privately expressed confidence that aircraft would be exempted from Trump’s tariffs.
According to Reuters, aircraft industry sources said that Boeing and Airbus contracts do not include any provision for tariffs, since the industry has for decades operated without them. Tariffs only become due once ownership of the aircraft has passed to the purchasing airline and the contract has been completed.
Most aircraft purchase contracts include a clause requiring all sides to pay their own taxes without explicitly mentioning tariffs, the sources said. But many aerospace companies are said to be reviewing the wording of contracts for future deals on the assumption that trade turbulence will remain for some time.
O’Leary’s comments in the letter may in part be a tactical intervention before a period of potentially tough negotiations with Boeing behind the scenes, the industry sources told the outlet.
COMAC ramps up
O’Leary said in the letter that the Irish airline has not had any discussions with COMAC about aircraft purchases since about 2011, but that it would “of course” consider it if they were 10 to 20 percent cheaper than Boeing’s main rival, Airbus.
Airbus, which is Boeing’s only competitor for large single-aisle aircraft that are currently certified in Europe, has repeatedly said it is sold out through the rest of the decade.
No Western airline has bought a COMAC plane. The Chinese company has applied for certification for its C919 jet in Europe, but not in the US.
The C919 jet is approximately 150 seats, or up to about 190 in dense layouts, smaller than the Boeing planes Ryanair currently flies and the MAX 10, which make up most of the planes it has on order, which can seat up to 230.
Ryanair’s threat comes as Boeing is looking to resell potentially dozens of planes locked out of China by tariffs after repatriating a third jet to the US in a delivery standoff that prompted more criticism of Beijing from Trump.
It is rare for airlines to cancel aeroplane contracts, rather than delay delivery, because of the small number of suppliers and the risk of returning to the back of the queue for capacity, dampening growth, analysts say.
And attempts by airlines to cancel contracts are typically resisted by planemakers, who can cite a list of excusable factors like supply chain delays, according to industry sources and previous court filings.
