Indonesia’s national flag carrier Garuda is the first to cancel a $4.9 billion order for 50 Boeing 737 MAX jets after two deadly crashes in less than six months raised concerns about the plane’s design.
The cancellation is a new blow for Boeing as the American aerospace giant has been forced to temporarily halt the delivery of the 737 MAX while the cause of the recent crashes remains up in the air.
Ethiopian Airlines Flight 302 crashed on 10 March while en route to Nairobi, Kenya, killing all 157 passengers onboard. The crash was the second high fatality incident involving the 737 Max after Indonesia’s Lion Air Flight 610 went down in the Java Sea on 29 October 2018 that left all 189 passengers dead.
The 737 MAX started being delivered in May 2017 and with 5,000 orders has been Boeing’s historic best-seller. The model represents 80% of commercial plane orders and 60% by value. With the recent crashes, however, the company now faces a potential investigation by the US Federal Aviation Administration.
The outcome of the Federal Aviation probe will determine the future of new orders for the 737 Max. Some companies are believed to be considering switching to the Airbus A320 model, which would mean a loss of the market share for Boeing. Companies that cancel any order may, however, find that they only have access to older models losing millions in fuel costs.
Companies with a 737 MAX fleet are paying a high cost, including American Airlines, which plans to cancel flights well into April because of the forced grounding of the 737 Max. Switching from planes to another model comes with additional costs in terms of maintenance and training.
Part of the appeal of the 737 MAX was that it was essentially an upgrade of an older model and required less training for personnel. Some have suggested that pushing the delivery date forward to compete with the Airbus A320 may have been a factor that undermining their security.
Boeing is currently working on a software update to the 737 Max fleet and is also planning to mandate a previously optional cockpit warning light on all MAX jets.