For the second day running, shares of Europe's Airbus (EADSY +0.52%) are declining. As of 11:40 a.m. ET Friday, the aerospace giant's stock is down 2.9%, bringing losses for the past two days past 6%. But why?
Yesterday, Delta Air Lines (DAL +1.46%) told investors on its morning quarterly conference call that the airline intends to "minimize" any tariffs it might have to pay under President Donald Trump's on-again, off-again "reciprocal tariffs" initiative. Said Delta CEO Ed Bastian: "The one thing that you need to know we're very clear on is that we will not be paying tariffs on any aircraft deliveries we take. ... we've been clear with Airbus on that, and we'll work through and see what happens from that."
OTC: EADSY
Key Data Points
Reading between the lines
Now, you might think that's not really Delta's decision to make. The way tariffs work at a basic level is, the U.S. government sets a tariff rate on goods (like airplanes) imported from abroad. And then whoever imports those goods (like Delta) pays the tariff. Except Delta seems to be saying this is not going to happen, and the question then becomes, if Delta isn't paying the tariffs, then who is?
And the implication is that Airbus will have to pay the tariffs.
Either that, or Delta won't be buying the planes from Airbus. It might shop Boeing (BA 0.64%) instead.
Is it time to sell Airbus?
And now you can understand why Airbus investors are feeling a bit nervous for another day that their company may start losing airplane sales.
Don't get me wrong. That may happen. That may be a risk. Airbus builds planes primarily in Europe, after all, and Europe-built planes would be subject to tariffs, so those sales seem at-risk. However, Airbus does assemble some of its most popular A320 and A220 airplanes right here in the U.S. as well, and those planes should dodge tariffs easily. That may even be what Delta was referring to, that in order to avoid paying tariffs, it will still buy A320s from Airbus, and buy only its bigger aircraft from Boeing.
It's still not great news for Airbus, true. But it's not a total loss, and Airbus investors don't need to panic just yet.
