In my own import/export business, I’ve learned the great power of a bluff. I’ve got the feeling that is what Garuda Indonesia doing in “canceling” its large Boeing 737 MAX 8 order.
It was Winston Churchill who was first said, “Never let a good crisis go to waste.” In a sense, Garuda Indonesia has a fiduciary duty to shareholders (the taxpayers of Indonesia) to extract the great product for the cheapest price. The duo of Lion Air and Ethiopian Airlines crashes gives the cash-strapped carrier a fresh chance at a better deal.
But as I wrote about earlier this week, unless Garuda is imploding before our eyes it does not have any viable alternates to its $5 billion order for 49 Boeing 737 MAX. If these aircraft remain part of Garuda’s long-term fleet plan, I expect this “cancellation” is merely a bargaining chip ahead of talks with Boeing next week.
Thus far, we don’t know if there is a serious design flaw on the 737 MAX. If the latest software update totally fixes the stall sensor issue, it is unlikely that Garuda can make a contractual case that it can cancel the order. Typically, orders can only be canceled or deferred due to production and delivery delays.
On Friday, Garuda Indonesia told CNN:
Our passengers have lost confidence to fly with the MAX 8.
That may well be. But that is very unlikely to be a reason for canceling.
Think about why we hear certain airlines — like Garuda or Norwegian — complaining the loudest. It is because they are cash-strapped right now. It’s all part of the wonderful game of aircraft purchase negotiation.
I don’t blame Garuda one bit for trying to re-negotiate its position. But I’m predicting right here that the two sides will emerge next Thursday with a face-saving compromise. Again, never let a good crisis go to waste…