ABOUT $600 billion-plus order for Boeing’s 737 Max is experiencing hitches after several big customers have threatened to reconsider their purchases in the wake of Ethiopian Airlines crash.
The March 10 Ethiopian Airline aircraft crash was the second deadly accident involving Boeing 737 plane since October.
VietJet Aviation JSC, which doubled its order to about $25 billion only last month, said it will decide on its future plans once the cause of the tragedy is found. Kenya Airways Plc is reviewing proposals to buy the Max and could switch to Airbus SE’s rival A320. Russia’s Utair Aviation PJSC is also seeking guarantees before taking delivery of the first of 30 planes.
This is just as Indonesia’s Lion Air firms up moves to drop a $22 billion order for the 737 in favour of the Airbus jet, according to a source, who knows about the plan. Separately, a $5.9 billion order from a unit of Saudi Arabian Airlines equally hangs in the balance.
The 737, which first entered service in the late 1960s, is the aviation industry’s best-selling model and Boeing’s top earner.
The re-engineered Max version has racked up more than 5,000 orders worth in excess of $600 billion, including planes that have already been delivered.
Boeing, whose shares lost 11 per cent of their value last week, faces escalating financial risk after two disasters involving its newest narrow-body jet in the past five months. The stock inched up 0.5 per cent last Wednesday in New York after seeing its biggest two-day drop in almost a decade.
The deadly crash in Ethiopia comes just about five months after the October 29 crash of another Boeing 737 Max plane, operated by Indonesia’s Lion Air. The relationship between the carrier and Boeing soured after the manufacturer pointed to maintenance issues and human error at Lion Air as the underlying cause. Although, the planes pilots had been battling a computerised system that took control following a sensor malfunction.
The March 10’s loss of an Ethiopian Airlines 737, where 157 people died, bore similarities to the Asian tragedy, stoking concern that a feature meant to make the upgraded Max safer than earlier planes has actually made it harder to fly.
Boeing is in crisis as most of the world grounded the plane. US regulators joined the global chorus by grounding the plane, citing evidence showing the Ethiopian Airlines flight may have experienced the same problem as the plane that went down five months ago off Indonesia.
“With extensive grounding of the 737 Max, near term news could get worse for Boeing before it improves,” Cai von Rumohr, an analyst with Cowen & Co., said in a note. However, he added, “because the company is readying an update to its flight-control software, “we don’t see meaningful long term risk”.
Indeed, the only real rival to Boeing is European plane maker Airbus, whose production line for the A320neo is full well into the next decade. Alaska Air Group Inc. said last week.
VietJet is monitoring the situation and will reach a decision on whether to go ahead with its purchase following “official conclusions” from global regulators and the Civil Aviation Authority of Vietnam, it said in a statement last Wednesday.
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