Oral Article Summary

Boeing's troubles deepen after Garuda cancels 737 Max order - 600bn sales book under threat ? Indonesian carrier cites customer fears

NewspaperMarch 23, 2019 | Financial Times [30 Day Embargo] (London, England)

Author: STEFANIA PALMA — SINGAPORE | Page: 10 | Section: Features

566 Words

Garuda Indonesia has scrapped its multibillion-dollar order of 49 Boeing 737 Max 8 jets, in the first reported order cancellation for the aircraft involved in the fatal Ethiopian Airlines and Lion Air crashes. The airline revealed that it sent Boeing a letter on March 14 asking to cancel its order of Boeing 737 Max 8 jets due to passengers' loss of confidence in the aircraft, Ikhsan Rosan, a Garuda spokesman, said yesterday. "[Passengers] always ask when they make a reservation if it is a Max or not. If it is, we need to book [them] on another flight. Because of the low confidence in the Max by our passengers, we need to inform Boeing we have to cancel our order," said Mr Ikhsan. The cancellation comes amid reports that several airlines are threatening to reassess their own Boeing orders in the wake of the Ethiopian Airlines crash earlier this month, jeopardising the US company's $600bn-plus order book for 737 Max aircraft. "They've certainly put Boeing at great risk by doing so," said Henrich Greve, professor of entrepreneurship at Insead, a business school, in Singapore. Airlines similar to Garuda — which have been associated with lower safety standards and which cannot afford to make mistakes in light of low profitability — will especially "be wondering why they're still hanging on to [Boeing's] order ...[and thinking] maybe they should go for a more prudent aircraft model," added Mr Greve. Garuda's request ramps up pressure on Boeing after the Ethiopian Airlines tragedy triggered a global ban on the Max 8 fleet and prompted a steep selloff in Boeing's shares, which have fallen almost 12 per cent since the crash. The stock price fell by almost 1 per cent yesterday, after reports emerged of Garuda's cancellation. A dysfunction of Boeing's new antistall feature, MCAS, was suspected of playing a role in the Lion Air 737 Max crash off Indonesia last October that killed all 189 people on board. Initial reports into the Ethiopian Airresponse, lines crash, which happened only five months later and killed all 157 people on board, suggest MCAS may also have played a role in that tragedy. Both were new planes that went down shortly after take-off. Garuda said it would like to substitute other Boeing aircraft for the Max 8 jets. It was still waiting for the US company's but Boeing had told the airline it would be travelling to Jakarta on March 28 "to discuss options", said Mr Ikhsan. It is unclear whether Garuda will face any cancellation fees. "We are still discussing this point," the airline's spokesman said. Mr Ikhsan said that prior to the Lion Air crash, Garuda had discussed options with Boeing to replace Max 8s with widebody aircraft to offer more longhaul, international flights. Out of the 50 jets of this kind ordered by Garuda, only one had been delivered to the airline. Indonesia is among the countries that banned Boeing 737 Max 8 jets from flying in or over its airspace until further notice in the wake of the Ethiopian Airlines crash. The US government has ordered a review into the way in which the Federal Aviation Administration approved the Boeing 737 Max 8 aircraft, as other countries questioned the ability of the US to set global safety standards. Boeing said it would not comment on "discussions with customers".

Caption: Garuda's request to cancel its multibillion-dollar order of 49 Max 8 jets ramps up pressure on Boeing, which has been forced to ground the jet — Willy Kurniawan/Reuters