Aircraft industry sources say Boeing and Airbus contracts do not include any provision for tariffs

International news via Reuters:

Ryanair on Thursday threatened to cancel orders for hundreds of Boeing aircraft if a U.S.-led tariff war leads to materially higher prices, and said it could look at alternative suppliers, including Chinese planemaker COMAC.

The threat by Europe’s largest low-cost carrier and one of Boeing’s biggest customers was the latest sign of a potential reordering of the global aerospace industry if U.S. President Trump does not exempt the sector from his tariff plans.

But with COMAC not yet certified in Europe and Boeing’s main rival Airbus saying it is sold out through the rest of the decade, Ryanair may find it hard to follow through on its threat, one industry source said.

In a letter to a senior U.S. lawmaker, Ryanair’s chief executive Michael O’Leary said Trump’s tariffs could threaten 330 Boeing 737 MAX aircraft that his airline has on order, which have a list price of more than $30 billion.

“If the U.S. government proceeds with its ill-judged plan to impose tariffs, and if these tariffs materially affect the price of Boeing aircraft exports to Europe, then we would certainly reassess both our current Boeing orders, and the possibility of placing those orders elsewhere,” O’Leary said.

The letter, seen by Reuters, was a response to a warning by U.S. Representative Raja Krishnamoorthi, a Democrat from Illinois, about the security implications of Ryanair following through on an earlier suggestion it might consider a COMAC order.

Boeing was not immediately available for comment.

CHANGE OF TONE

The threat to cancel orders marked a hardening of tone from O’Leary, who in April had threatened to delay deliveries. In March he said that Boeing executives had privately expressed confidence that aircraft would be exempted from Trump’s tariffs.

Aircraft industry sources say Boeing and Airbus contracts do not include any provision for tariffs, since the industry has for decades operated without them. Tariffs only become due once ownership of the aircraft has passed to the purchasing airline and the contract has been completed.

Most aircraft purchase contracts include a clause requiring all sides to pay their own taxes without explicitly mentioning tariffs, the sources said. But many aerospace companies are said to be reviewing the wording of contracts for future deals on the assumption that trade turbulence will remain for some time.

O’Leary’s comments in the letter may in part be a tactical intervention ahead of a period of potentially tough negotiations with Boeing behind the scenes, the industry sources said.

CONSIDERING COMAC

O’Leary said in the letter the Irish airline has not had any discussions with COMAC about aircraft purchases since about 2011 but that it would “of course” consider it if they were 10%-20% cheaper than Boeing’s main rival Airbus.

Airbus, which is Boeing’s only competitor for large single-aisle aircraft that are currently certified in Europe, has repeatedly said it is sold out through the rest of the decade.

No Western airline has bought a COMAC plane. The Chinese company has applied for certification for its C919 jet in Europe but not in the United States.

The C919 jet is around 150 seats or up to around 190 in dense layouts, smaller than the Boeing planes Ryanair currently flies and the MAX 10, which make up most of the planes it has on order, which can seat up to 230.

Ryanair’s threat comes as Boeing is looking to resell potentially dozens of planes locked out of China by tariffs after repatriating a third jet to the United States in a delivery standoff that prompted more criticism of Beijing from Trump.

It is rare for airlines to cancel airplane contracts rather than delay delivery because of the small number of suppliers and the risk of returning to the back of the queue for capacity, dampening growth, analysts say.

And attempts by airlines to cancel contracts are typically resisted by planemakers, who can cite a list of excusable factors like supply chain delays, according to industry sources and previous court filings.

Additional reporting by Tim Hepher; Writing by Padraic Halpin and Conor Humphries; Editing by Jane Merriman

Investors had been worried about the fallout from sweeping U.S. tariffs

International news via Reuters:

Microsoft forecast on Wednesday stronger-than-expected quarterly growth for its cloud-computing business Azure after blowout results in the latest quarter, calming investor worries in an uncertain economy and lifting its shares 7% after hours. 

Microsoft’s results, which follow similar outcomes from Google last week, could ease concerns about a potential slowdown in AI demand, after some analysts pointed to canceled data-center leases at Microsoft as a sign of excess capacity.

Investors had also been worried about the fallout from sweeping U.S. tariffs that are prompting businesses to rein in spending, but robust advertising sales at Meta Platforms suggested that is so far not happening.

The rise in Microsoft’s shares set it on course to add more than $200 billion to its value.

Microsoft said revenue at its Azure cloud division rose 33% in the third quarter ended March 31, exceeding estimates of 29.7%, according to Visible Alpha. AI contributed 16 percentage points to the growth, up from 13 points in the previous quarter.

The company also forecast cloud-computing revenue growth of 34% to 35% on a constant currency basis for the fiscal fourth quarter to between $28.75 billion and $29.05 billion, well above analyst estimates, according to data from Visible Alpha.

Commercial bookings growth – which reflects new infrastructure and software contracts signed by business customers – rose 18% in the fiscal third quarter, driven in part by a new Azure contract with ChatGPT creator OpenAI. Microsoft declined to comment on the size of the deal or what role it played in overall Azure sales growth.

However, Amy Hood, Microsoft’s chief financial officer, told investors on a conference call that the AI contribution to the cloud computing business was in line with the company’s expectations, while “the real outperformance in Azure this quarter was in our non-AI business.”

“So the only real upside we saw on the AI side of the business was that we were able to deliver supply early to a number of customers,” Hood said.

The company’s Azure results came after a number of Wall Street analysts had lowered expectations as research reports said Microsoft had ended some data center lease obligations.

CEO Satya Nadella said on a conference call that Microsoft has a long history of constantly adjusting its data center plans, but only in recent quarters had analysts started closely scrutinizing those moves.

“The numbers were skeptical going in, giving them the room to beat pretty heavy. The beat wouldn’t have been this big if we didn’t have all these problems,” said Dan Morgan, senior portfolio manager at Synovus Trust, referring to tariff uncertainty.

SPENDING RISES FOR SHORTER-LIVED ASSETS

Redmond, Washington-based Microsoft reported a profit of $3.46 per share in the quarter, topping expectations of $3.22 per share.

Revenue rose 13% to $70.1 billion, with the Intelligent Cloud unit, which houses Azure, contributing $26.8 billion.

In the third quarter, Microsoft’s capital expenditures jumped 53% to $21.4 billion, however the proportion of longer-lived asset expenditures fell to about half of the total.

Hood told investors that in the company’s fiscal 2026, which will begin in July, capital expenditures will continue to grow, but at lower growth rates than for the current year and with more of an emphasis on shorter-lived assets.

That reflected a shift in Microsoft’s spending on assets such as data center buildings toward assets such as chips, said Jonathan Neilson, Microsoft’s vice president of investor relations.

“You plug in CPUs and GPUs, and then you can start recognizing revenue,” Neilson said, referring to categories of chips made by Intel, Advanced Micro Devices and Nvidia, among others.

Microsoft, which has repeatedly said it is capacity constrained on AI, has been pouring billions into building its AI infrastructure and expanding its data-center footprint.

A pullback in Big Tech’s AI spending would have big implications for suppliers such as chip giant Nvidia, as well as the U.S. economy. J.P. Morgan analysts estimated in January that data-center spending could contribute between 10 and 20 basis points to U.S. economic growth in 2025-2026. 

Reporting by Deborah Sophia and Aditya Soni in Bengaluru and Stephen Nellis in San Francisco; Editing by Sayantani Ghosh, Matthew Lewis and Sonali Paul