Indonesia Airline Cancels 49-jet Boeing Deal

JAKARTA, INDONESIA � 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 thought to be the first formal cancellation for the model.

We have sent a letter to Boeing requesting that the order be canceled, Garuda spokesman IkhsanRosan said.

The reason is that Garuda passengers in Indonesia have lost trust and no longer have the confidence in the plane, he said.

The spokesman told AFP that Boeing officials will visit Indonesia next week to discuss Garuda's plans to call off the order.

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

Garuda is also talking to Boeing about whether to return the plane it has received, the spokesman told AFP.

The carrier had so far paid Boeing about $26 million, while the company's director told Indonesian media outlet Detik that 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 GustiNgurahAskharaDanadiputra told Detik.

Will Lion Air follow?

ShukorYusof, 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 that 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 strategize their fleet management.

Delivery postponed

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 $22 billion order from Boeing made in 2011.

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

Source: Voice of America

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