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.
CONCLUSION
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…
It’s am unsafe plane sounds like a good reason. The certification process is under FBI criminal investigation. Even if Boeing says it had fixed something why should it be trusted.
Sounds like a good enough reason.
“… we don’t know if there is a serious design flaw on the 737 MAX. If the latest software update…”
A software update AFTER the plane went into public, and issued AFTER 2 (two) accidents, did not only evidencing a serious design flaw. It further irrevocably proves that SAFETY was never considered prior delivery of an airplane.
Anyway, garuda cancelling orders? Local politics. Someone has said that before in this blog. And he/she is right.
Dude, youre talking like you know the politics in Indonesia.
“… we don’t know if there is a serious design flaw on the 737 MAX. If the latest software update…”
We know quite well there is a design flaw. And software will not address that flaw. The thing is unsafe and will remain unsafe until the hardware is redesigned.
Who knows? Maybe COMAC will step in with a better deal. The unbridled greed at Boeing opens up other doors, albeit under tragic circumstances.
The problem with your comment is that COMAC will never get an FAA cert for its’s C-919, so how does this help.
Are you want of those idiots that think american body(ies) apply to the whole world?
You’d be surprised to know that football is played with an actual ball (not spherical thingy) and foot!
A football as the world knows it is spherical. A football as Americans know it is ovoid.
Who cares? FAA is not a World certification bodies for the whole wolrd
Regardless of the certifications for the C919, the first deliveries for it will be in 2021, while Garuda’s 737s were supposed to be delivered in 2019-20, so COMAC isn’t a viable option for them.
wasn’t Garuda on the verge of bankruptcy a while back ?
Matthew,
in this i bet you that you are dead wrong.
Matthew is not dead. He is also probably right. Before reading Matthew’s article, I suspected that because Garuda Indonesia did not order A320neo’s, they are bluffing or decided that they really need 787’s more and want to switch orders.
Yup, they are negotiating. All their narrow-body jets are B737. Similar to Lion Air they don’t have much of a choice.
They might negotiate a discount or a delay of delivery. Wouldn’t be surprised if they ordered more planes tban they need, alot of Asian carriers did…
Rupert, they have choices… look citilink is gaining huge success with A320
And boeing always want a 5stars airline to use their product as a mai fleet (738NG in GA case)
I would say there is a very big chance the cancellation goes through. Garuda has just extended the lease on its 737-800s through at least 2030, and what the airline really needs is some efficient wide bodies. They will not need any new narrowbodies for the foreseeable future, and if they do, the budget spinoff citilink has outstanding a320 orders they can pull.
I would not be surprised if we end up with a 787 order instead of a 737 MAX order next week. I really dont think Garuda loves its fleet of 777s; they’re too big for the airline’s traffic, and the 787-9 would be perfect for its planned US routes, while the -10 would be better suited for the wide majority of its route network, given that it almost exclusively flies intra-Asia flights. A combined order of say, 5 787-9s and 15 -10s could be something that emerges from the talks.
as Indonesia, Garuda decision is like double edge sword, but “Our passengers have lost confidence to fly with the MAX 8.” is kinda true…
we Indonesia is easily getting anxiety when something bad like this happens and chooses to avoid it as much as possible. All my friends and families already avoiding 737 Max planes since Lion Air case, even when they traveling aboard, except there is no other option.
even myself is very rare to fly, but I also try to avoid 737 Max for my next flight, if possible.