Breaking news coming from Jakarta that Garuda Indonesia has canceled their order for 49 Boeing 737 MAX placed a few years ago. This comes after two disastrous 737 MAX crashes and a worldwide grounding of the aircraft for safety reasons. Garuda operates over 70 737NG aircraft. As such, the 737 MAX was a natural addition to the fleet and part of the 737NG replacement plan. At face value, Garuda’s order was worth $4.9 billion.
Garuda made the following comments upon ordering the 737 MAX:
The Cancellation
Garuda Indonesia’s President Director, Gusti Ngurah Askhara Danadiputra, announced the cancellation on Thursday, March 21st. In his comments, he specifically stated that the 737 MAX 8 suffered from bad publicity that spooked travelers from choosing the 737 MAX 8. Specifically, Garuda Indonesia believes there is no longer passenger confidence in the aircraft, so they are cancelling their order.
This isn’t a major issue for Garuda Indonesia since they only have one 737 MAX 8. Depending on how long the groundings of MAX aircraft last, Garuda could find a new buyer or lessor for that specific aircraft. They could also sell it back to Boeing as part of a deal. Garuda Indonesia is already an Airbus customer. They operate both the A330-200 and 300 widebodies. In addition, Garuda Indonesia has 14 A330-900s on order.
Cancelling the 737 MAX leaves Garuda with few options for sourcing a narrowbody replacement for their 737-800s. Russia is working on an alternative, however, it seems like Garuda will need an established plane with passenger confidence. In addition, based of Garuda Indonesia’s original order, they will probably go for a fuel efficient plane that carry a similar number of passengers.
This makes the A320neo the most likely option for Garuda Indonesia. On an order for 50 aircraft, Garuda will probably get some discounts from Airbus that would make the delayed entry, any cancellation fees with Boeing, and increased maintenance and training costs worth it if passengers will still fly with them.
The A320neo, however, would not be entirely out of place in Garuda’s fleet. Garuda Indonesia operates a low-cost arm called Citilink. Citilink flies over 50 A320/A320neo family aircraft.
Overall
In the grand scheme of things, Garuda Indonesia is not a major 737 MAX customer. Norwegian, SpiceJet, Ryanair, Jet Airways, Lion Air, Flydubai, and Southwest all have over 100 737 MAX aircraft on order. However, if Garuda Indonesia is expressing concern about the 737 MAX, it is likely that other airlines are also concerned about their 737 MAX fleet and orders.