Delta Skirts Trump Tariffs by Sending Airbus Jets on Tour

Delta Air Lines Inc. is sidestepping millions of dollars in U.S. tariffs on European jetliners by initially routing them far outside the country to such places as Amsterdam, Tokyo and El Salvador.

The U.S. carrier has taken delivery of seven European-built Airbus SE planes since President Donald Trump’s levies took effect in October 2019. Rather than flying them home as it had in the past, Delta has based the aircraft overseas. The decision, coupled with the definition of new planes in the tariff rules, has kept the jets from being considered imports even though some of them regularly enter the U.S.

Avoiding the tariffs has saved Delta, Airbus’s biggest U.S. airline customer, precious cash while customs records show that rival carriers have been charged the duties. Every dollar counts for an industry struggling to cut costs amid a collapse in demand caused by the coronavirus pandemic. Like other major U.S. carriers, Delta has received billions of dollars in government aid while parking planes, reducing flights and trimming jobs as airlines steel themselves for a long slump.

“We have made the decision not to import any new aircraft from Europe while these tariffs are in effect,” Delta said in a statement to Bloomberg News. “Instead, we have opted to use the new aircraft exclusively for international service, which does not require importation.”

The Delta strategy rests on language that classifies planes as used once they’ve flown for any reason other than testing and delivery. Tariffs on new-plane imports then don’t apply, even if the aircraft are soon flying to the U.S.

While Delta wouldn’t discuss the financial details, the savings are likely to be significant. Based on aircraft list prices, the anti-tariff strategy has saved the company as much as $270 million, although the true amount is surely much smaller given the steep discounts that are customary on jetliner sales.

Delta shares, down 35% this year through Monday, dropped 3.3% to $36.74 at 9:42 a.m. in New York amid broad declines in U.S. airlines. Airbus fell less than 1% to 89.77 euros in Paris.

The implications go far beyond Delta’s bottom line. The airline’s efforts also illustrate how the Trump trade wars have prompted U.S. companies to reconfigure their business practices to avoid tariffs, often in ways that make them less efficient.

The Trump administration imposed tariffs on $7.5 billion of annual imports from the European Union after the World Trade Organization ruled in favor of the U.S. in a long-running case over subsidies to Airbus. In addition to levies on French wine and Scotch whisky, large civil aircraft faced a 10% duty that was later increased to 15%.

If a major customer like Delta is able to continue buying planes without paying the tariffs, Trump’s attempted punishment loses impact. The U.S. also risks losing leverage in negotiations to resolve a trans-Atlantic dispute over aircraft subsidies that has hit Boeing Co. as well as Airbus.

The EU won a WTO case of its own against subsidies for Boeing and this month announced tariffs on $4 billion in U.S. goods. Removing that irritant is one of the items high on the agenda for Joe Biden’s incoming administration as the next president tries to repair ties with European allies that were frayed under Trump.

Since the U.S. imposed the punitive tariffs in October 2019, it has sought to collect more than $55 million on planes imported from France, Germany, the U.K. and Spain, the countries subject to the higher levies, according to data provided by U.S. Customs and Border Protection.

The CBP is barred from disclosing what it collects from individual companies, said Nathan Peeters, a spokesman for the agency. A spokesman for U.S. Trade Representative Robert Lighthizer, who ordered the tariffs, didn’t respond to a request for comment.

In the case of the Airbus tariffs, the Trump administration appears to have created the very loophole Delta may be using.

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