Trade war unlikely to affect India’s civil aviation but may increase leasing activity: Sky One Chairman, Jaideep Mirchandani

The Chairman of Sky One says the industry is closely watching whether reciprocal tariffs could cause significant supply chain disruptions

Ending speculation, US President Donald Trump announced new tariffs on imports from both allied and non-allied nations this month. His administration argues that these reciprocal tariffs address ‘unfair trade practices,’ where certain countries impose higher duties on US exports. 

Under the new decision, imports from India face a 26 per cent tariff, compared to 20 per cent for the EU and 24 per cent for Japan. Meanwhile, imports from China are subject to a hefty 34 per cent tariff, escalating trade tensions.

India currently applies an average effective tariff of 9.5 per cent on US exports, while the U S imposes just 3 pc on Indian goods. With the new tariffs, various sectors like the jewellery industry will be majorly affected as the US accounts for 30 pc of India’s jewellery exports. An increase to 26 per cent could significantly impact trade flows.

Generally, trade wars can adversely affect cargo movement by increasing costs, disrupting supply chains, and potentially reducing trade volumes. This is concerning because cross-border e-commerce demand has been one of the main pillars fuelling global growth in recent years. Now, beyond air cargo, will these new tariffs impact civil aviation, which is witnessing rapid growth in India?

“Countries like India are likely assessing how these tariffs will affect specific industries. In aviation, beyond the volume of exports and cargo movement, the focus will be on whether these tariffs disrupt supply chains and raise costs. This is especially important given the large aircraft orders placed by Indian carriers with U S aerospace major Boeing,” says Jaideep Mirchandani, Group Chairman of Sky One.

He says that the impact on the travel industry could be indirect. “If tariff rates increase the cost of imported goods, airlines cannot pass it directly onto fares. However, if India’s exports to the US decline due to tariffs, it could reduce foreign exchange inflows, weakening the rupee and strengthening the dollar, making the country a more expensive destination for visitors.  We will then have to see how this affects Indian airlines’ plans to expand long-haul travel to the US ,” adds Mr Mirchandani.

He says that reciprocal tariffs can also increase acquisition costs for lessors, which would ultimately be passed on to airlines, leading to higher ticket prices. As aircraft prices rise and airline cash reserves shrink, airlines may rely even more on leasing rather than purchasing.

“But in a trade environment shaped by tariffs, the cost of imported goods, including aircraft and their components, would rise. This could lead to higher inflation, prompting the apex bank to maintain high interest rates to control price increases. If interest rates remain high, airlines may be reluctant to take out loans to buy new aircraft due to higher borrowing costs. Instead, they would likely prefer leasing planes rather than making expensive purchases. This situation would benefit aircraft lessors, as demand for leased aircraft would increase,” concludes Mr Mirchandani.