Delta Air Lines Signals Trouble Ahead for Boeing Amid Tariff War
Delta Air Lines (NYSE: DAL) has become the first major airline to report its financial results since the onset of the tariff war that began in early April. The insights shared during their earnings call carry significant weight for the aerospace sector, particularly for Boeing (NYSE: BA), whose future may be more precarious in light of these developments.
During Delta's first-quarter earnings call, the companys management outlined several critical points that could have far-reaching implications for Boeing investors. The airline reported a revenue increase of 3.3% year-over-year. Although this is a positive sign, it fell short of management's earlier projection of closer to 4%, which had already been revised down from a more optimistic forecast of 7%-9% provided during their fourth-quarter earnings call in January. This trend highlights the growing uncertainty surrounding global economic growth, largely influenced by ongoing tariff disputes, which significantly affected Deltas booking numbers in the first quarter.
Deltas management, acknowledging the unpredictable market conditions, chose not to update its full-year guidance. They also announced plans to curtail expected capacity growth in the latter half of the year as a strategy to protect profit margins in a daunting economic landscape. Many investors were not surprised by these announcements, as Delta had previously indicated a slowdown linked to tariffs back in March. The recent escalation in the trade conflict has not likely inspired any optimism among financial analysts or investors.
However, one particular statement made by Delta CEO Ed Bastian during the earnings call raised eyebrows and should be a cause for concern among Boeing stakeholders. He declared, We will not be paying tariffs on any aircraft deliveries we take, adding that, If you start to put a 20% incremental cost on top of an aircraft, it gets very difficult to make that math work. This statement was specifically aimed at Airbus, the only aircraft manufacturer from which Delta is anticipating deliveries this year.
The implications of Bastians comments are troubling for Boeing. It suggests that Airbus may need to either absorb part of the tariff costs imposed by the U.S. on European goods or risk potential delays or cancellations of aircraft orders. This dynamic raises critical questions about how non-U.S. airlines might respond to tariffs imposed by other nations and the European Union on American products, thereby extending the repercussions of the tariff war beyond just Delta.
Moreover, the situation appears to worsen for both Airbus and Boeing as both companies face increased operational costs due to tariffs. These costs could arise directly from higher prices on components sourced from the U.S. and the E.U., or indirectly through rises in expenses incurred by suppliers affected by tariffs. Such financial pressures could significantly hinder the ability of these manufacturers to remain competitive in an already strained market.