Major Indonesian airline cancels $5 billion 737 MAX order

The largest airline in Indonesia, Garuda, has informed Boeing they want to cancel their $4.9 billion order for 49 Boeing 737 MAX 8 aircrafts. Garuda Indonesia’s spokesperson Ikhsan Rosan said in a statement they are cancelling the order due to concerns that “its business would be damaged due to customer alarm over the crashes.”

Originally Garuda ordered 50 airplanes in total, of which the first one Boeing delivered in December 2017. Garuda already has a fleet of 77 older Boeing 737 models; two of the aircrafts ordered were ‘converted’ from earlier orders for 737-800’s. Garuda also operates Boeing’s 777-300 ER, while the company’s 747-400 fleet was retired over the last few years, so the company was looking for an economically-friendly long-range aircraft to replace it.

The air carrier also has an order for 14 Airbus A330neo; a wide-body design comparable to Boeing’s 787 Dreamliner. The airline also has the older model A330 in their fleet. If Garuda breaks the deal with Boeing successfully, the most likely winner would be Airbus, seeing as the A320neo aircraft is the closest comparison to the 737 MAX both cost-wise and in range.

While this order is a smaller percentage of the total amount of 737 MAX aircrafts on order, it could signal longer-term problems for Boeing if more airlines also cancel their orders. According to numbers from Boeing (as of February), there were in total 4,636 unfilled orders.

Indonesia’s airlines make up a significant part of the unfilled orders, with 236 still on order (of which 49 are from Garuda). The largest customer of the 737 MAX is Southwest Airlines with 249 on order, which is unlikely to be cancelled, since their whole fleet is based on 737’s.

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