Will EU-India Trade Deal's Aircraft Tariff Cut Boost Airbus Sales?

The European Union and India announced a "historic" trade deal. This agreement was finalized on Tuesday in Brussels and New Delhi. Negotiations had spanned two decades before the final push. India’s Prime Minister Narendra Modi called it the "mother of all deals."

Aviation Industry Impact

A key provision affects the commercial aviation sector. India will eliminate tariffs on aircraft and spacecraft. These duties were previously up to 11 percent on most goods. This move is a major win for the European aerospace group Airbus. EU exports of aircraft and spacecraft were valued at €6.4 billion in 2024.

This zero-tariff policy will reduce the cost of new aircraft. It also lowers costs for related aerospace components. This offers a significant competitive advantage to EU manufacturers. It further reinforces India’s integration into European supply chains.

Benefits for Indian Airlines

The Indian aviation market is undergoing rapid expansion. Indian airlines are inducting aircraft at a fast pace. Major carriers have placed massive new aircraft orders. This includes significant orders for Airbus A320 and A350 family jets.

Lower import costs will accelerate fleet modernization efforts. For example, Air India is actively modernizing its fleet. They are taking deliveries of A350s and other aircraft. The tariff elimination makes these new deliveries cheaper. This can improve airline profitability and capacity growth.

Broader Economic Context

The overall deal removes or cuts tariffs on over 90 percent of EU goods. It is expected to save EU exporters up to €4 billion annually. The European Commission projects EU exports could double by 2032.

India also benefits from immediate duty elimination on key exports. These include textiles, leather, and certain marine products. The agreement also includes a mobility pact. This helps skilled Indian workers access the EU bloc.

Implementation and Next Steps

• The agreement still requires legal scrutiny and translation.
• It must be approved by the European Parliament and Council.
• India must also complete its ratification process.
• The deal is expected to take some time before entering into force.

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