Airlines and hotels are not immune to changes in government policy. A few days back, I wrote about how Canadians are canceling their vacations to the US. They’re citing President Donald Trump’s rhetoric as the primary reason. Beyond the rhetoric, policy changes or restrictions are bound to have more impact in the longer term. Trump tariffs have been on the news lately post inauguration. What will be their impact on air travel?
Trump Tariffs and their impact
The Trump administration has imposed 25% tariffs on imports on steel and aluminum. These tariffs are set to come into effect from March 12, 2025. As per Skift, the move is set to how downstream effects on customers, resulting in higher fares for passengers.
There could also be an impact on aircraft costs, airline operations, and, ultimately, airfares, says Gad Allon, professor at the University of Pennsylvania Wharton School and director of the Jerome Fisher Program in Management and Technology.
The impact of Trump’s tariffs may take longer to materialize from the customer’s viewpoint. However, aviation experts largely agree that tariffs are bound to increase costs for plane manufacturers. The trigger? Increasing costs for parts and spares. Moreover, if the Trump tariffs are in place in the long run, most industry experts agree that airlines will eventually pass on the costs to customers. Also, they point out that the tariffs will impact business travel, cargo and foreign exchange markets as well.
Eventually, passengers may be left to foot the bill for the increased costs. “Since nearly 40% of global airline fleets operate on leased aircraft, this cost increase would put upward pressure on ticket prices,” said Allon. “Assuming that fuel prices remain stable, the aggregate cost increase across fleets could lead to a 2% to 4% rise in airfares, with long-haul international flights seeing more pronounced effects due to exposure to cross-border tariff escalation.”
The Pundit’s Mantra
It’s no surprise that when businesses see a rise in input costs, they’re more than likely to pass it on to customers. We’ve seen announcements about tariffs in the last few weeks. only to be rolled back later. If the tariffs stick, there’s every chance customers will see an increase in airline fares in the long run.
Post Covid-19, customers have already seen higher fares. Airlines and hotels have also increase miles and points redemption costs. If we see higher airfares, how will it impact airline redemption costs?
These Tariff announcements are bound to create uncertainty when it comes to planning your travel. If you’re looking to travel later this year, should you book now or wait?
How are you looking to navigate the uncertainty in policy and how its impact on travel in the coming months? Tell us in the comments section.
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