The U.S. aerospace industry awoke Wednesday to the prospect of a Donald Trump presidency, scrambling in unpredictable ways the future business prospects of the defense and commercial airplane sectors.
The U.S. aerospace industry awoke Wednesday to the prospect of a Donald Trump presidency, scrambling in unpredictable ways the future business outlook for the defense and commercial airplane sectors.
On the defense side, industry analyst Loren Thompson of the Lexington Institute wrote a piece for Forbes headlined: “Trump’s win means happy days are here again.”
Thompson said president-elect Trump’s broad plans to spend more on weapons systems, slash the corporate income tax rate and bolster U.S. manufacturing all bode well for defense contractors, including Boeing.
In contrast, the commercial airplane side of Boeing’s business depends critically on overseas sales and on an international order geared toward free trade.
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Trump’s anti-trade and protectionist rhetoric during the election campaign has raised real concern that the new adminstration’s policies might stall the expansion of the global airline industry.
Trump specifically railed during the campaign against the Obama administration’s deal with Iran, upon which hangs a major Boeing widebody jet order, and against the Export-import Bank, which supports the financing of many overseas commercial airplane sales.
And Trump reserved much of his fiercest criticism for trade with China, which buys one third of all the single-aisle 737s Boeing builds in Renton, in addition to a growing number of widebody jets.
The morning after the election, though, aerospace industry leaders strove hard to be positive about the risk to future trade.
“We’ll try to work with (Trump’s) team to convince him that having trade opportunities is an essential for our American industries, like the commercial aircraft industry,” said Dave Melcher, chief executive of the Aerospace Industries Association (AIA) lobbying group, which represents the biggest U.S. aerospace manufacturers and defense companies as well as their suppliers.
“And if we are going to craft trade deals, fine, try and make them as competitive as you can for the benefit of U.S. industries and jobs. But don’t denounce them, because we are relying on them to give us access to the markets where we want to sell.”
“First and foremost, Donald Trump is a businessman,” Melcher added. “If he’s got a businessman’s mindset about this, he’s going to look for ways to help U.S. industry be successful.”
Boeing itself remained conservative in its early comments on the election outcome, simply congratulating the president-elect and saying it would work with him “to ensure that U.S. companies can compete, win and grow our economy to provide good jobs to U.S. workers; as well as preserve American leadership in national security.”
A meeting at Trump Tower
Melcher said that after AIA gave the Trump campaign a series of position papers early last summer, he and representatives of other industries were invited to meet the candidate in June at Trump Tower in Manhattan.
Accompanying Melcher were nine senior aerospace executives, including Leo Brooks, Boeing vice president of government affairs in its defense and space unit,who is a former Brigadier General in the U.S. Army and the company’s senior liaison with the Pentagon, NASA and Homeland Security.
Melcher said the meeting lasted several hours and his contingent had the floor on aerospace for about 40 minutes. He found Trump to be “an interested, smart businessman who asked good questions,” he said.
Among the AIA priorities discussed in that meeting was an end to the automatic defense spending cuts known as “sequestration” that began in 2013 under the Budget Control Act.
And as part of an argument about encouraging trade that supports U.S. manufacturing jobs, Melcher specifically brought up the need to support the Ex-Im Bank, which currently is not authorized by Congress to do any deals worth more than $10 million.
In an interview with Bloomberg News in early August, Trump described the Ex-Im Bank, which is opposed by Tea Party Republicans, as “sort of a feather bedding” for a few companies that can do perfectly well without government financing.
“So I don’t like it,” Trump said. “ I think it’s unnecessary. … It’s really not free enterprise. I’d be against it.”
Melcher said AIA will continue to work to get the votes in Congress to fully authorize Ex-Im and that Trump “is going to have to work with Congress.”
More generally, although he’s concerned about all the anti-trade rhetoric — “a lot of that was campaigning” — he believes the industry will be able to work with Trump.
“I really don’t see him as blasting and rebuilding a system that works,” said Melcher.
Airlines in limbo
Many of Trump’s statements suggest local impacts on the commercial airline industry flowing from what appears likely to be a more confrontational foreign policy.
For example, the Obama adminstration recently approved U.S. airlines to fly to Cuba. Alaska Airlines flights from Los Angeles to Havana are set to begin in January.
Yet Trump attacked the ”normalization” of U.S. ties to Cuba and promised to revoke Obama’s order.
Are those flights now effectively dead? Alaska and the other airlines must wait and see.
Commercial airline trade groups on Wednesday avoided talking about the risk of trade protectionism and instead looked to potential positives in likely U.S. domestic policy shifts.
Airlines for America (A4A), the industry trade organization for the leading U.S. airlines, congratulated the president-elect and specifically welcomed his “$1 trillion plan to improve infrastructure.”
A4A chief executive Nicholas Calio emphasized the need to spend some of that on strengthening the nation’s over-burdened air traffic control system.
“We look forward to working with the Transition Team on strengthening our infrastructure in the sky,” Calio said in a statement.
Doug Lavin, vice president of external relations with the International Air Transport Association (IATA), which repesents airlines worldwide, in a statement simply outlined the group’s U.S. policy priorities.
Those include rolling back the Obama administration’s “aggressive pursuit of passenger rights regulations” which he said threatens “nearly 40 years of successful airline commercial deregulation.”
One lobbying group took the opportunity to welcome Trump’s protectionist stance as a lever on a specific issue: the competitive threat to U.S. legacy airlines from the three giant Gulf carriers, Emirates, Qatar Airways and Etihad, all of which are now flying into the U.S.
The Partnership for Open and Fair Skies, representing the major U.S. airlines including American Airlines, Delta and United, issued a statement denouncing what it characterizes as unfair state subsidies to those airlines from the United Arab Emirates and Qatar.
“We are optimistic that the Trump administration will stand up to the UAE and Qatar, enforce our trade agreements and fight for American jobs,” the statement said.