Christian Scherer: ‘US-China tariff war not to benefit Airbus; Boeing to lose more with elevated trade barriers in Europe’

Pranav Mukul
What I fear most in this very unfortunate situation (Boeing 737MAX crisis) that our competitor is in is the public reaction. The loss of trust in specific products perhaps and the industry as a whole: Christian Scherer, CCO, Airbus

Concerned about increasing protectionism in the US, Airbus Chief Commercial Officer Christian Scherer said that its rival Boeing has more to lose if trade barriers were elevated in Europe for the US-made airplanes. Speaking to PRANAV MUKUL at the company s headquarters in Toulouse, he also said that contrary to what is perceived, trade tensions between the US and China are not beneficial for Airbus. Scherer also spoke about the air safety regulator s role in light of recent crashes. Edited excerpts:

How worried are you about increasing protectionism in the US?

You have the threat of US protectionism, which is a pretty severe concern, which I must say, we thoroughly regret because we could be supplying in the prime market of this category of airplanes (A220 aircraft), which is North America. If you threaten to impose a tariff on the product at the border, it makes the product more expensive.

The Trump administration is ready to impose tariffs on fuselage parts, wings, other components that will be going to the Mobile plant in Alabama what do you see as the risk there that could negate the benefits of Mobile?

It is a risk. What specific risk? It s the risk of the content that goes into these airplanes that come from countries that would be the target of these tariffs. The immediate risk is that it will increase the cost and therefore the price of these airplanes. Is that good for an industry that by definition works across borders? No, it sounds like something that goes against grain.

Delta has made it clear that they will not absorb cost of any tariffs in the Bombardier trade. What about the other airlines? Will Airbus absorb the cost or will it be passed on to the customers?

That is privileged information that s contractual between us and our customers. What I can say though is that you have to imagine that if one side goes through with process of imposing tariffs, you have to imagine that the other side will naturally retaliate. So, is that in interest of our competitor to see trade barriers being elevated in Europe on Boeing airplanes? I d say there s more to lose for them than for us. So, I hope this leads to a settlement very quickly.

Are you concerned that some political elements could be introduced to regulation and certification that could impact sales?

I am generically concerned about politics mixing in a business that should be very much commercially and financially driven. So be it on this topic or any other topic, what I do want to say is that the suggestion that I have heard by some that somehow Airbus is in cahoots with EASA (European Aviation Safety Agency) I want to violently reject that as being borderline insulting. If there s an insinuation that somehow the European regulators are playing it a little bit harder than others and that is somehow related to Airbus, I want to absolutely deny that. I am an industrial guy and what I want is a set of rules that safeguard the checks and balances in the industry and puts safety as the number one priority. How the regulators and the governments elect to do that is really up to them. They are more competent in that role than we are. There is a disequilibrium in the mandate. The FAA (US Federal Aviation Administration) has a mandate of supporting industry and safeguarding the safety of flight. That is not symmetrical with EASA or other regulators around the world. But that is not a suggestion from our part that there s anything wrong with the FAA.

But there s a paradigm shift after the Boeing 737MAX crisis, do you feel the change

We are not the regulator, we cannot influence the regulation. What we can do is show the regulator our design, our production system and get approvals. Occasionally we have to do a little course correction and that is perfectly fine. What I fear most in this very unfortunate situation that our competitor is in is the public reaction. The loss of trust in specific products perhaps and the industry as a whole. As an Airbus guy, my concern is that a specific issue turns into a generic problem.

The bilateral aviation safety agreement signed between the EU and China seen along with the souring of relations with the US in light of the WTO case and tariff impositions could this be seen as Airbus taking sides in the trade wars?

That s a huge question. I would answer that with a bit of generality but I think that ultimately relations with China will normalise whether they are with the US or the Europeans and we will continue to supply to China like we used to. Do the trade tensions between the US and China work in the advantage of Airbus? No, because you can imagine that big-ticket items such as airplanes are part of this discussion so it s not necessarily the situation as it meets the eye of the layman.

You mentioned that the industry has become less cyclical. Does this mean reducing dependency on oil prices?

The industry s strength is mainly going to be driven by the fuel prices and the cost of money. If we have high cost of money and fuel, there will be a slowdown. From that perspective, sure, it will be cyclical. But I meant that we don t have predominantly North American market and when North America goes well, the whole industry goes well. What we have now is compensation between various geo-political arenas. We are developing our presence in Asia.

(The trip to Toulouse was sponsored by Airbus)