Garuda May Become the First Airline to Cancel a Big 737 MAX Order After Grounding

Mar 14, 2019

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With the Boeing 737 MAX grounded as a consequence of the Lion Air crash followed closely by the Ethiopian Airlines crash this past weekend, which was eerily similar, the airplane’s maker is facing a grave risk: Customers may cancel their orders, possibly switching to the rival A320neo from Airbus.

The entire world has now grounded the aircraft, with no time frame on when those flight bans might be lifted.

With that type of uncertainty around an aircraft — these were brand new planes having major accidents — it’s no surprise that airlines might be looking to cancel standing orders for the 737 MAX. Garuda, the flag carrier of Indonesia, has just said it may cancel its order for almost 50 of the planes, a move that could cost Boeing almost $5 billion in lost revenue.

While substantial, the Garuda order isn’t even in the top 15 biggest 737 MAX orders. If other airlines with much larger outstanding orders decide to follow suit it could be a disaster for Boeing and its shareholders. The Boeing order book currently has orders for around 5,000 of the various 737 MAX models, with some of the largest of those orders coming from Southwest, American, Ryanair, Air Canada, China Southern and Norwegian Airlines. That order book is worth around $500 billion.

Boeing is working with regulators around the world to ensure passenger safety on board the MAX, and has already announced a software update for the aircraft. It’s virtually certain that Boeing and regulators will eventually get the planes airborne again. How soon passengers might be willing to fly on a MAX might be a different story.

Featured image by PRNewsfoto/Boeing

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