Boeing has suffered what seems to be the first official cancellation of a 737 Max order, as a result of the crashes of two of the jets and the subsequent worldwide grounding of the whole fleet.
Garuda, Indonesia’s flag carrier, ordered 50 737 Max 8 jets at a list price of $4.9 billion in 2014. It has received one plane since then, and now it doesn’t want the others.
“We have sent a letter to Boeing requesting that the order be cancelled,” a spokesman told AFP. “The reason is that Garuda passengers in Indonesia have lost trust and no longer have the confidence” in the model.
That is unsurprising, given that the first fatal crash, last October, involved an Indonesian airline, Lion Air. The second occurred this month, when an Ethiopian Airlines 737 Max 8 crashed shortly after takeoff in a similar manner. In total, the accidents took 346 lives.
Although neither of the crash investigations has as yet been concluded, the suspicion is that Boeing’s automated stall-prevention software was at fault. The U.S. manufacturer is now working on a fix for its flight control software, on-board displays, manuals and training, and hopes to get the Federal Aviation Administration (FAA) to certify the changes.
The FAA is however already taking criticism over its handling of the original 737 Max approval process, in which it reportedly let Boeing conduct its own certification tests. So European and Canadian air regulators are wary, and plan to test the changes themselves once they are ready.
Garuda’s cancellation of its 737 Max order provides a fresh indication of how much of a financial hit Boeing could end up taking here, though the airline told AFP it may switch its order to another Boeing model.
The fixes could cost Boeing over $500 million. Norwegian Air has demanded that Boeing compensate it for the grounding of its 18 Max jets, and the longer the groundings continue, the higher those costs will rise. There are around 350 grounded Max jets around the world, and temporary replacements could cost airlines $250,000 per plane per month, if they can even be found.
Boeing’s shares held reasonably steady following the Garuda cancellation, falling only 0.13% at the time of writing. Boeing declined to provide comment for this piece.
