Qantas and Virgin Australia Boeing aircraft orders could see country avoid Trump steel tariffs

Aircraft orders from Qantas, Virgin Australia and the RAAF could help Australia avoid Trump’s steel and aluminium tariffs.

Qantas will take delivery of several more Boeing 787s in coming years. Picture: iStock

A near-$25bn worth of aircraft orders from the US destined for the country’s major airlines and defence could shield Australia from sweeping steel and aluminium tariffs under the second Trump administration.

Qantas and Virgin Australia, along with ASX-listed Macquarie Group, have more than 80 orders placed with Boeing for commercial aircraft over the coming years.

The Royal Australian Air Force (RAAF) is also investing nearly $10bn for 20 C-130JHercules aircraft from Lockheed Martin, set to arrive from 2027. This follows last year’s completion of a $16.2bn deal for 72 Lockheed Martin F-35A fighter jets.

All steel and aluminium imports to the US will be hit with 25 per cent tariffs as part of Mr Trump’s new trade war, which has formed a cornerstone of his “Make America Great Again” pledge.

The US imported about $638m worth of steel and $439m of aluminium from Australia last year, and President Trump has confirmed he is considering exemptions from tariffs after a discussion with Prime Minister Anthony Albanese.

“We have a surplus with Australia, one of the few, and the reason is they buy a lot of airplanes. They’re rather far away and they need lots of airplanes. We actually have a surplus. It’s one of the only countries which we do. I told him that that’s something that we’ll give great consideration to,” Trump told the media.

Virgin Australia has 31 Boeing planes on order, including the Boeing 737 Max 10.

AMP chief economist Shane Oliver said Trump’s recognition of Australia’s aircraft purchases could be a positive sign for tariff exemptions, but cautioned there was still uncertainty.

“It is positive that Trump is acknowledging that we buy a lot more (including airplanes) from the US than what we sell to them. That is a positive step that could very well lead to an exemption, but there is still a way to go,” he said.

Dr Oliver also suggested Trump used airplanes as a simple example to communicate with his base.

“He’s trying to communicate to his base, who might then wonder, well, how come Australia’s got an exemption? Why is that? And he’s trying to give simple examples that people might understand if he does decide to give that exemption,” he said.

Both Qantas and Virgin Australia’s fleets are dominated by Boeing aircraft, and both airlines have more on order.

Macquarie Group is an active buyer of US airplanes through its majority-owned leasing business, of which the Australian Retirement Trust owns a 25 per cent stake. Picture: Ian Waldie/Bloomberg

Of Qantas’ 125 aircraft, 89 are Boeing 737s and 787-9s, with another 12 787-9s on order. Virgin Australia operates an almost exclusively Boeing fleet, with all but one of its 97 aircraft built by the US company. It also has 31 Boeing 737 Max aircraft on order, including six Max 8s, set to arrive this year, and 25 Max 10s.

However, Qantas is shifting some of its future fleet towards Airbus, with plans to replace many of its Boeing 737s with Airbus A321XLRs and aims to retire its QantasLink 717 fleet in favour of Airbus A220s. It will also add 24 A350s to its international fleet from 2026.

Boeing 787-9s have a ticket price of $479m each, putting the total value of Qantas’ order at around $5.7bn, although it’s understood the airline has negotiated a much better deal with the manufacturer.

Virgin Australia’s order is worth about $4bn with the airline leasing back the new aircraft from the China Aircraft Leasing Company (CALC).

Although some airline leaders, including Emirates president Tim Clark, have been very outspoken about the issues at Boeing resulting in delays in aircraft delivery, Qantas and Virgin have been much more diplomatic.

Virgin Australia boss Jayne Hrdlicka insisted the airline “made a good choice” in sticking with Boeing when it lodged new aircraft orders, despite having to rejig schedules to work around delayed deliveries.

The RAAF has 20 C-130J Hercules aircraft from Lockheed Martin due to arrive from 2027.

Macquarie Group, through its aircraft leasing business Macquarie AirFinance, is another major buyer of American aircraft. It doubled its commitment to the Boeing 737 Max last year with its first direct order of 40 jets, worth about $US4.5bn ($7.2bn) at list prices, although manufacturers generally discount heavily when ordering in bulk.

Macquarie AirFinance is 50 per cent owned by Macquarie Asset Management, while PGGM Infrastructure Fund and Australian Retirement Trust own 25 per cent. The leasing arm owns or has commitments for 115 Boeing aircraft, including 737-700s, 737-800s, 737 Max, and 777-300ERs.

United States Studies Centre research director Jared Mondschein said Australia’s fate regarding tariffs remains uncertain, noting in Trump’s first term exemptions led to unintended loopholes.

“The countries that did face tariffs exported their tariff goods to a country which did not face tariffs as a way to get into the US without tariffs. That could be one reason why the Trump administration does not allow an exception to Australia,” he said.

Mr Mondschein added that aviation plays a key role in the US-Australia trade surplus, making the relationship unique compared to other US trade partners.

The RAAF completed a $16.2bn order of 72 Lockheed Martin F-35A aircraft last year. Picture: AFP/ADF

“The key reason why the US has a trade surplus with Australia is because of the major purchases of Boeing planes for Australian air fleets. It’s important to note that this trade surplus is not in relation to other goods with Australia.”

The Department of Foreign Affairs and Trade reported Australia imported $65.1bn worth of American goods and services in the year to December 2023, while the country exported $33.6bn.

Aircraft, spacecraft, and parts totalled $2.1bn, making it the third-largest manufacturing category behind motor vehicles and civil engineering and parts.

Overall, it ranked sixth among all exports, with professional services, gold, and recreational travel the top three.

Originally published as Qantas and Virgin Australia Boeing aircraft orders could see country avoid Trump steel tariffs