Indonesia’s Garuda cancels 49-jet Boeing 737 deal after crashes

Airline says it has ‘lost trust’ and no longer has ‘confidence’ in the model after two deadly crashes in five months.

The first Boeing 737 MAX 7 is unveiled in Renton, Washington, U.S. February 5, 2018. REUTERS/Jason Redmond
The first Boeing 737 MAX 7 is unveiled in the US in February 2018 [File: Jason Redmond/Reuters]

Indonesia’s national carrier Garuda has told Boeing it will cancel a multibillion-dollar order for 49 Boeing 737 MAX 8 jets after two fatal crashes involving the plane, in what is believed to be the first formal cancellation of the troubled model.

“We have sent a letter to Boeing requesting that the order be cancelled,” Garuda spokesman Ikhsan Rosan said.

“The reason is that Garuda passengers in Indonesia have lost trust and no longer have the confidence” in the plane, he said, adding the airline was awaiting a response from Boeing.

Boeing officials will visit Indonesia next week to discuss Garuda’s plans to call off the order.

Garuda already received one of the planes, Rosan said, part of a 50-aircraft order worth $4.9bn at list prices when it was announced in 2014.

The airline is also talking to Boeing about whether to return the plane it has received, the spokesman said.

The carrier has so far paid Boeing about $26m, while the company’s head told Indonesian media outlet Detik it would consider switching to a new version of the single-aisle jet.

“In principle, it’s not that we want to replace Boeing, but maybe we will replace [these planes] with another model,” Garuda Indonesia director I Gusti Ngurah Askhara Danadiputra told Detik.

‘Probably not the last’

Shukor Yusof, head of Malaysia-based aviation consultancy Endau Analytics, said Garuda’s announcement appeared to mark the first formal plans by a carrier to cancel an order for the 737 MAX 8.

“[It] will probably not be the last. There is a risk that Garuda’s rival Lion Air, which also has many 737 MAX 8 orders, might make the same decision,” he said.

“That is a risk. This has been made public by the Lion Air CEO. He stated publicly that he is considering” a cancellation.

He added it was difficult to predict whether more major carriers would follow suit.

“There are many unanswered questions and each airline has specific needs,” Yusof said. “Each airline needs to deliberate how they want to strategise their fleet management.”

This month, Lion Air said it was postponing delivery of four of the jets after an Ethiopian Airlines Boeing 737 MAX 8 went down minutes into a flight to Nairobi, killing all 157 people on board.

Budget carrier Lion – Southeast Asia’s biggest airline by fleet size and a major Boeing customer – said the planes had been on order for delivery this year, but the company was re-evaluating the situation.

Lion Air operates 10 Max 8 jets, part of a then-record $22bn order from Boeing made in 2011.

The airlines are the only two that use the Max 8 in Indonesia.

Erratic descents

The Ethiopian tragedy came after a Lion Air jet of the same model crashed in Indonesia in October, killing all 189 people on board.

Both planes reportedly experienced erratic steep climbs and descents as well as fluctuating airspeeds before crashing shortly after take-off.

Investigators have honed in on an automated anti-stalling system introduced on the plane, which is designed to point the nose of the plane downward if it is in danger of stalling.

The development comes as the American manufacturer struggles to cope with the fallout from the two crashes, which have cast a spotlight on the safety certification process and shaken confidence in a plane that is crucial to its future plans.

Source: AFP