Ultra-low-cost carrier Spirit has warned of the impact new import tariffs could have on its ability to order new aircraft. The airline operates an all-Airbus fleet, and many of its aircraft are delivered from the manufacturer’s headquarters in France.
Since taking office in January, President Donald Trump has imposed tariffs on numerous countries, including some of the U.S.’s biggest trading partners. Some have since been rolled back or temporarily suspended.
Tariffs are currently enforced on all imports from the European Union. Trump initially called for 20%, but the rate has been temporarily reduced to 10% through early July. The tariffs are expected to return to the original 20% unless a deal is struck in the next month.
Spirit’s Order Book
Spirit has orders for nearly 100 Airbus aircraft, and 92 are set to be delivered from Europe over the next six years. It also has lease agreements for 39 A320neo and A321neo aircraft to be delivered between 2025 and 2028. Regardless of whether the next administration continues Trump’s tariff rates, that still leaves a majority of Spirit’s deliveries potentially subject to higher prices.
A brand new Airbus A320neo has a list price of $110.6 million. With a 20% tariff applied, the new cost rises to $132.72 million, adding billions of dollars to airplane costs. While it is likely Spirit received a bulk discount on close to 100 jets, the price hike is nonetheless significant, and one that Spirit will need to pass on to its customers.
But the price impact won’t be limited to the aircraft themselves. Also impacted are new parts required to service the fleet and keep aircraft flying. While Spirit certainly has some backlog of parts, it won’t last forever, especially if specialty parts with less backlog are required.
“The imposition of these tariffs may increase the cost of, among other things, imported new Airbus aircraft and parts required to service our Airbus fleet, which in turn could have a material adverse effect on our business, financial condition, and/or results of operations,” Spirit said in a filing with the U.S. Securities and Exchange Commission.
Recent Bankruptcy
The news comes as Spirit attempts a significant rebranding after exiting Chapter 11 bankruptcy protection. The company is trying to build a completely new image while staying fundamentally true to its low-cost roots. The goal is to be a friendlier, more accessible airline that can compete with major legacy airlines without the same price hike.
As part of its rebrand, Spirit has opened an additional service class, increased the perks of its frequent flier program, and reshaped its advertising to appear more accessible and desirable for more people.
A significant issue leading up to Spirit’s bankruptcy filing was the grounding of numerous aircraft required by engine maker Pratt & Whitney. The manufacturer found last year that a materials issue would require engines to be inspected sooner than normal, causing planes to be grounded sooner and for longer periods than Spirit anticipated.
Not the Only Airline
Spirit is not the only U.S. airline to reconsider its orders for foreign aircraft. Delta has warned it may stop taking delivery of foreign-made aircraft due to Trump’s tariffs. Besides a large fleet of Boeing 717s, 737s, 757s, and 767s, Delta operates a significant Airbus fleet. It is the only A350 operator in the U.S., retired its Boeing 777s during the COVID-19 pandemic, and may need to consider retiring aging 717s and 757s within the next 10 years.
Delta has already warned it will defer orders for Airbus aircraft despite orders for everything from the A220 up to A350-1000 models.
Alaska is also wary of the impact of tariffs, as it is delaying the delivery of two Brazilian-made Embraer E175s due to the increased costs.
Boeing has expressed concerns over how tariffs will impact its supply chain, which relies on materials produced around the world. The manufacturer may struggle to raise funds due to the tariffs.
Uncertain Future
Due to these risks, Spirit says that it may need to reconsider its order book.
“We may seek to postpone or cancel delivery of aircraft currently scheduled for delivery, and may choose not to purchase as many aircraft as we intended in the future,” Spirit said in a statement to Yahoo Finance, adding that the future impact of tariffs is “very much subject to change.”
