The usual festive atmosphere at the US Aerospace Industries Association’s (AIA) annual media luncheon in December was infused by a general anxiety about the incoming US presidential administration. Just hours before the luncheon, President-elect Donald Trump caused a media firestorm by suggesting on Twitter that Boeing’s contract to build the next version of Air Force One, the presidential aircraft, be canceled because it was too costly.
AIA president and CEO David Melcher, asked to react during a press conference, said responding to every Trump tweet might not be the best policy for industry players. “This is a relatively new phenomenon,” he said, referring to a US president-elect having a provocative Twitter feed. “I know that the right answer is not going to be to tweet back.”
But Boeing, aircraft engine manufacturers GE Aviation and Pratt & Whitney and the US airline industry are struggling to determine what the right answer to the Trump years will be. Given his hardline protectionist stance in the US election campaign, the new president presents a great deal of uncertainty for the air transport business, which thrives on global connectivity and open trade.
From Boeing’s lucrative business in China to its sale of aircraft to Iran to US airlines’ new scheduled commercial flights to Cuba, there is a lot of guesswork taking place to determine where the Trump administration will stand.
And foreign airlines serving the US are casting a guarded eye as well. Will Trump move to overturn Norwegian Air International’s recently approved foreign carrier permit to fly to the US from Ireland? Will he be receptive to US major airlines’ push to restrict Gulf carriers’ access to the US market? Will he rescind the US’s commitment to global environmental pacts, including the aviation emissions agreement recently adopted by ICAO?
Melcher said AIA was “determined to counter anti-trade sentiments that are harming efforts to expand our industry’s trade competitiveness,” adding, “We’ll continue to make a compelling case for positive engagement in global trade.”
Melcher said the incoming administration would have to make a number of decisions about the practical consequences of Trump’s trade rhetoric. For example, Trump has repeatedly knocked US companies that “offshore” manufacturing work. But companies such as Boeing, which has a large customer base in China, plan to conduct some manufacturing work abroad to better serve local customers and to seal important deals that ultimately also secure or create American jobs.
Boeing has entered into an agreement with the Commercial Aircraft Corp. of China (COMAC) to open a joint venture facility in China for interiors completion, painting and delivery of 737 aircraft to Chinese customers. The airframes will still be built in Washington state before being flown to China for the completion work.
Melcher said a “legitimate question that has to be addressed” by the Trump administration is whether manufacturing that is offshored “principally to serve offshore markets is a good thing or a bad thing.”
Boeing’s anxiety goes beyond the Chinese facility, on which construction has not yet started. As president-elect, Trump quickly moved to question key foundations of the overall US-China relationship, including the status of Taiwan and Chinese actions across a number of fronts, particularly regarding trade with the US. If Trump has a falling out with Beijing, could retaliation include canceling massive orders for Boeing commercial aircraft by state-owned Chinese airlines?
Concern is not limited to China policy. Boeing in December firmed its agreement with Iran Air to sell the carrier 50 737 MAX 8s, 15 777-300ERs and 15 777-9Xs valued at $16.6 billion. But Trump and a number of his surrogates have been critical of the nuclear accord with Iran that made the commercial aircraft deal possible, and it is unclear how the Trump administration will handle fragile relations with Iran. Losing the Iran Air order would not only be a blow to Boeing because it would likely see the business go to Airbus, but the US manufacturer is already planning two production rate cuts to the 777 line in 2017 and can ill-afford further 777 sales setbacks.
“I think everybody is a little bit nervous about what the future holds for” the Boeing-Iran Air contract, Melcher conceded.
US airlines, for their part, will be watching closely to see what Trump does regarding President Barack Obama’s historic opening to the Cuban market. Trump has spoken skeptically about Obama’s Cuba policy, and the new president will have the power to undo much of what Obama has initiated. American Airlines, Delta Air Lines, United Airlines, JetBlue Airways, Southwest Airlines, Frontier Airlines, Spirit Airlines and Silver Airways all launched flights to Cuba in the second half of 2016, and Alaska Airlines will serve the island nation starting in January.
But, come Jan. 20, Trump will have the power to cancel the agreement signed in February 2016 by the US and Cuba to restart scheduled flights between the countries. Trump, in fact, has threatened to scuttle the entire US-Cuba reopening “if Cuba is unwilling to make a better deal,” he wrote on Twitter in late November.
The air transport world is waiting to see if President Trump’s tweets and deal-making force turbulent course corrections.