March 22, 2019 / 4:10 AM / a month ago

Indonesia's Garuda asks to cancel 737 MAX order it had been reconsidering before Ethiopia crash

JAKARTA (Reuters) - Garuda Indonesia has asked to cancel an order for 49 Boeing Co 737 MAX 8 jets, citing a loss of passenger trust following two crashes, although it had been reconsidering the order before the latest disaster in Ethiopia last week.

Garuda is the first airline to publicly confirm plans to scrap an order for the jets after the Ethiopian Airlines crash that killed 157 people. That accident came five months after a Lion Air 737 MAX crashed off Indonesia killing 189, and led to the grounding of the world’s entire fleet of the aircraft.

“Many passengers told us they were afraid to get on a MAX 8,” Garuda CEO Ari Askhara told Reuters on Friday.

An analyst, however, noted that Garuda had been looking at its fleet planning before the Ethiopian crash.

“This is an opportunity to make some changes that otherwise may be difficult to do,” CAPA Centre for Aviation Chief Analyst Brendan Sobie said.

Analysts last week said the grounding of the 737 MAX fleet could give some airlines a good excuse to delay or cancel purchases, saving cash on their balance sheets.

Garuda could switch its order, valued at $6 billion at list prices, to other Boeing models, Chief Financial Officer Fuad Rizal said.

He said negotiations with Boeing were ongoing and Airbus SE jets were not under consideration.

The airline has only one 737 MAX in its fleet and its prior generation 737s remain relatively young. In 2017, the airline pushed back the rest of the deliveries to 2020 and beyond due to financial difficulties.

Askhara said last week it was possible it would cancel the order for 20 of the jets, with a final decision depending on what the U.S. Federal Aviation Administration does after the Ethiopian crash.

He told Reuters before the crash that the airline had decided to reduce the Boeing 737 MAX order from 49 by swapping some to widebody Boeing models. That could help it salvage deposits made on the 737 MAX planes.

Boeing declined to comment on customer discussions.

Indonesian rival Lion Air has been reconsidering its orders since its October crash.

Reporting by Cindy Silviana; additional reporting and writing by Jamie Freed; Editing by Stephen Coates and Mark Potter

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