Garuda cancelling order for 49 Boeing 737 Max 8 aircraft

A Garuda Boeing 737 Max 8 parked at the Garuda maintenance facility at the Soekarno-Hatta airport near Jakarta last week. The Indonesian carrier's move to cancel its order could spark more cancellations from other major carriers.
A Garuda Boeing 737 Max 8 parked at the Garuda maintenance facility at the Soekarno-Hatta airport near Jakarta last week. The Indonesian carrier's move to cancel its order could spark more cancellations from other major carriers.PHOTO: REUTERS

JAKARTA • Indonesia's national carrier Garuda has told Boeing that it will cancel a multibillion-dollar order for 49 Boeing 737 Max 8 jets after the model was involved in two fatal crashes in six months.

The move could spark more cancellations from other major carriers, an aviation analyst said, as Boeing and United States federal regulators get set to face their first public grilling by Congress since the deadly incidents.

"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 that 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, he told Agence France-Presse (AFP).

Garuda had already received one of the planes, Mr Rosan said, part of a 50-aircraft order worth US$4.9 billion (S$6.6 billion) at list prices when it was announced in 2014.

Garuda is also talking to Boeing about whether to return the plane it has in its fleet, the spokesman said.

The Indonesian carrier has so far paid Boeing about US$26 million. The company's head told local media outlet Detik that it would consider switching to a new version of the single-aisle jet.

 
 
 
 

"In principle, it is 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.

A Boeing spokesman in Singapore told AFP yesterday: "We do not comment on customer discussions."

Shares in Boeing were down nearly a full percentage point after Garuda's announcement.

Since the crash of an Ethiopian Airlines B-737 Max 8 jet on March 10, Boeing shares have fallen 12 per cent and US$28 billion has been wiped off its market value.

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

It "will probably not be the last. There is a risk that Garuda's rival Lion Air, which also has many B-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)."

But he added that it was difficult to predict whether more major carriers would follow suit. "There are many unanswered questions, and each airline has specific needs," he said.

Last week, cash-strapped Malaysia Airlines said its order for 25 of the B-737 Max jets was under review.

Lion Air said this month that it was postponing delivery of four of the jets after 157 people were killed in the Ethiopian Airlines Max 8 crash.

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

Lion Air did not immediately respond to AFP's request yesterday for comment on its plans following Garuda's announcement.

However, SilkAir has no plans, for now, to change its order for the B-737 Max 8 jets.

"At this point in time, our orders remain unchanged," a spokesman told The Straits Times.

The Singapore Airlines' regional arm has six B-737 Max 8 jets in its fleet and another 31 on firm order, he said.

AGENCE FRANCE-PRESSE

• Additional reporting by Karamjit Kaur

 
A version of this article appeared in the print edition of The Straits Times on March 23, 2019, with the headline 'Garuda cancelling order for 49 Boeing 737 Max 8 aircraft'. Print Edition | Subscribe