Indonesian airline Garuda said Friday that it’s canceling a multibillion-dollar order for Boeing’s 737 Max 8 passenger jet after the plane was involved in two deadly crashes in less than five months.
“Our passengers have lost confidence to fly with the Max 8,” Garuda spokesperson Ikhsan Rosan told CNN.
The Indonesian carrier ordered 50 of the planes in 2014 for $4.9 billion. It has taken delivery of one of them but has now sent a letter to Boeing (BA) saying it no longer wants to receive the remaining jets on order, Ikhsan said. It’s the first airline to say it’s canceling a 737 Max 8 order.
It’s the latest blow to Boeing over the 737 Max, its bestselling passenger jet. The planes have been grounded worldwide over safety concerns following the crash of an Ethiopian Airlines flight earlier this month.
Boeing representatives are planning to visit Jakarta on March 28 to discuss the cancellation request with the airline, Ikhsan said.
A Boeing spokesperson said the company doesn’t comment on “customer discussions.”
Aviation authorities around the world have grounded the 737 Max following the Ethiopia crash. Many airlines have announced they won’t fly the planes until they know more about the circumstances surrounding the crash. The grounding is expected to cost Boeing billions of dollars.
But most major airline customers of Boeing contacted by CNN on Friday either said they had no plans to change their orders, or that it was too soon to comment on their plans. Both American Airlines (AAL), the world’s largest airline with 24 of the jets and orders for another 76, and Southwest (LUV), which flies nothing but 737 and 737 Max planes, said they had not changed their orders.
“We are, as all stakeholders, awaiting the results of the [crash] investigations. Airplane orders are part of a long-term fleet strategy,” said European carrier TUI Airlines, which has 14 of the jets and orders for 58 more.
The major airlines, especially those in North America, probably will not drop any of their orders for 737 Max jets said Jim Corridore, director of industrial equity research for CFRA Research. Rival Airbus has an even longer waiting list for planes and shifting from Boeing to Airbus would put an airline at the back of the line to have its order filled.
“Once they’re able to get the fix in place, I think that will go a long way to canceling any concerns about the plane,” he said.
CNN reported earlier this week that US Justice Department prosecutors have issued multiple subpoenas as part of an investigation into Boeing’s certification from the US Federal Aviation Administration and the company’s marketing of 737 Max planes.
The criminal investigation, which is in its early stages, began after a 737 Max aircraft operated by Indonesia’s Lion Air crashed in October, killing all 189 people aboard.
The FAA has said that data and physical evidence show similarities between the Ethiopian Airlines crash, in which 157 people were killed, and the Lion Air disaster. The agency said Wednesday that Boeing has developed a software patch and pilot training program to address issues with the 737 Max identified in the Lion Air crash.
The 737 Max jets are by far the most important product for the company. It has orders for nearly 5,000 of the aircraft, enough to keep production lines operating for years to come.
Jethro Mullen and Sandi Sidhu contributed to this report.
