Boeing takes $5 billion hit as Indonesian airline cancels 737 MAX order
Indonesia’s largest air carrier has informed Boeing that it wants to cancel a $4.9 billion order for 49 Boeing 737 MAX 8 aircraft. Garuda Indonesia spokesperson Ikhsan Rosan said in a statement to the Associated Press that the airline was cancelling due to concern that “its business would be damaged due to customer alarm over the crashes.”
Garuda had originally ordered 50 737 MAX aircraft, and Boeing delivered the first of those aircraft in December of 2017. The airline already operates 77 older Boeing 737 models; two of the aircraft ordered were conversions from earlier orders for 737-800s. Garuda also flies Boeing’s 777-300 ER, and the company retired its 747-400 fleet in the last few years—so the airline was looking for an economical long-range aircraft to fill in gaps.
But the stigma now attached to the 737 MAX 8 may have spoiled that relationship. The airline also has orders in for 14 of Airbus’ A330neo, a wide-body design comparable to Boeing’s 787 Dreamliner; the airline also flies 24 earlier-model A330s. If Garuda successfully breaks its deal with Boeing, the likely winner will be Airbus. Airbus’ A320neo is the most comparable aircraft to the 737 MAX in cost and range.
The Garuda cancellation would only put a small dent in the number of total 737 MAX aircraft on order. Based on data from Boeing, as of February there were 4,636 unfilled orders, so the outstanding order from Garuda would account for a little more than one percent of Boeing’s backlog. Still, Garuda’s exit could signal bigger long-term problems for Boeing as other carriers with mixed fleets of aircraft re-evaluate their positions.
Indonesia’s carriers as a whole make up a significant portion of existing orders (with 236 total still on order, including Garuda’s 49)—and most of them were ordered by Lion Air, the airline that flew the first 737 MAX to crash. China’s air carriers have 43 more 737 MAX aircraft on order currently on hold because the aircraft is grounded—and those orders could become cannon-fodder in ongoing trade disputes between China and the US.
Boeing’s single biggest customer for the 737 MAX is Southwest Airlines, with 249 vehicles. And it’s unlikely that Southwest will cancel, because its entire fleet is based on the 737 airframe. Other major customers such as FlyDubai and the leasing company GECAS (formerly GE Capital Aviation Services) may be less reluctant to pull the plug if they see the aircraft as a potential liability.
