IATA warns tariff-driven supplier price hikes could worsen aircraft delays for airlines

Speaking at the 69th Assembly of Presidents of the Association of Asia Pacific Airlines (AAPA) here, IATA Director General Willie Walsh said there was huge frustration that the supply chain issues are not getting much better. While airlines are a low margin industry, he said the margins of OEMs (Original Equipment Manufacturers) are high.

Global airlines are bracing for another cost squeeze as the industry warns that tariff-linked price hikes by aircraft and engine suppliers could derail the fragile recovery in aviation manufacturing. IATA Director General Willie Walsh on Saturday said supply-chain disruptions continue to delay aircraft deliveries and increase operating costs — and expressed concern that some OEMs are now talking about raising prices.

Speaking at the 69th Assembly of Presidents of the Association of Asia Pacific Airlines (AAPA), Walsh said “there was huge frustration that the supply chain issues are not getting much better,” even as airlines continue to operate with thin margins. In contrast, he noted that OEMs enjoy much stronger profitability.

Taking examples, he said engine makers “are actually improving their financial performance during a period of massive disruption which has added massive costs to the airline industry.”

Walsh added that “it is bothering when he hears suppliers talking about that they want to increase prices because of tariffs and other supply chain issues.”

“There's got to be a correction to this. Airlines need to be properly rewarded. I don't object to anybody making profits....
But we've got to see a greater balance and we need to see these critical suppliers raising their game and raising their game significantly to ensure that they're serving the industry in the way that we need to be served,” he said.

The global aviation sector continues to struggle with prolonged supply-chain bottlenecks since the pandemic, leaving airlines waiting for new aircraft even as passenger demand rebounds sharply. The worldwide commercial aircraft backlog exceeded 17,000 units last year — significantly higher than the 2010–2019 annual average of 13,000 — according to an IATA–Oliver Wyman study.

AAPA Director General Subhas Menon warned that tariffs now threaten to slow the already fragile recovery. “Tariffs will impact the nascent recovery of the supply chain and also increase non-fuel cost for the airlines,” he said.

He pointed out that while aircraft and engines are exempt, many of the raw materials and components sourced globally are not. “Supply chain recovery is now undermined by tariffs which increase supplier costs. While aircraft and engines are exempt, their raw materials, and components which come from many parts of the world, are not.

“Tariffs also affect demand through inflation. It is a double whammy as both supply, and demand sides of the market are affected,” Menon said, even as he reiterated that air transport demand remains strong.

On sustainability, Menon said that taxing airlines “directly or indirectly through mandates has not worked” and noted that Sustainable Aviation Fuel (SAF) production remains low.

The IATA–Oliver Wyman study estimates that supply-chain challenges will cost airlines more than USD 11 billion in 2025, driven by excess fuel burn, additional maintenance, increased engine leasing and higher inventory-holding expenses.Add as a Reliable and Trusted News Source Add Now!

Source: EconomicTimes
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