EU Tariffs on U.S.-Made Jets May Affect Ryanair’s Max Order

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Ryanair Holdings Plc’s long-delayed Boeing Co. 737 Max deliveries face a new hurdle after the European Union opted to apply tariffs to U.S.-made aircraft.

The European bloc said Monday it would levy 15% tariffs on U.S. jets, alongside other goods including wheat, cheese, tobacco and spirits. Dublin-based Ryanair, the continent’s biggest discount carrier, has more than 135 Max 200 jets on order, and has previously said it intends to take delivery of as many as 30 next year, once the model is cleared to fly following its 2019 grounding.

Unlike other carriers that have deferred aircraft purchases to conserve cash amid the Covid-19 pandemic, Ryanair has said it expects to receive its first Max plane early in the new year. The airline has about 4.5 billion euros ($5.3 billion) in cash, and wholly owns 80% of its fleet, the carrier said in a statement last week.

Boeing has over 300 pending orders for planes with airlines in the EU. Those include British Airways, which has 10 787s and 18 777Xs pending, while Deutsche Lufthansa AG has 20 787s and 20 777Xs due.

Boeing is likely to step in to make sure the move doesn’t impact its bumper order, according to Richard Aboulafia, an aerospace analyst with Teal Group.

“There’s no way Ryanair is going to pay these tariffs in the current environment,” he said by phone. “Boeing’s going to have to figure out how to resolve this, either by convincing the new administration to settle the case or paying the 15% for Ryanair.”

Counter Punch

The EU decision represents a counter punch to the U.S. placing tariffs on $7.5 billion of European goods after Washington won a World Trade Organization case against aid to Airbus SE. Last month, in a parallel 16-year-old lawsuit, the EU received final WTO permission to slap $4 billion of duties on American products over subsidies to Boeing.

Airbus welcomed the EU decision to impose tariffs on U.S. imports. The planemaker “supports all necessary actions to create a level-playing field and continues to support the EU’s commitment to finding a negotiated settlement of this long-standing dispute,” a spokesman said in a statement.

Ryanair Chief Executive Officer Michael O’Leary has previously said discussions are ongoing with Boeing for a follow-on order for new planes. Ryanair declined to comment, as did IAG SA, the parent company of British Airways.

©2020 Bloomberg L.P.

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