Indonesia’s Garuda announced earlier today that it was cancelling its $6 billion, 49-plane order for the 737 MAX, and was in discussions with Boeing about returning the one aircraft of that order already delivered. This is the first cancellation of a 737 MAX order since the worldwide fleet was grounded on March 13. (Lion Air, another Indonesian carrier, reportedly decided to switch a $22 billion, 200-plane order to rival Airbus after losing a 737 MAX in a crash in October.)
“The reason is that Garuda passengers in Indonesia have lost trust and no longer have the confidence” in the plane, a company spokesman said.
Fifty planes is a drop in the bucket compared to the 5,000 orders that Boeing now has on the books, but it raises the prospect that other carriers may follow suit. The possibility that the 737 MAX could be a toxic brand is a terrifying prospect for Boeing. The 737 family is the best-selling plane the company has ever built, with over 10,000 sold since its introduction in 1967. Today 737 MAX sales account for a third of Boeing’s profits. If the model has to be written off, it could cost the company more than $5 billion. Could Boeing survive the loss of its flagship product?
The Garuda move is just the latest in a string of hits Boeing has taken since Ethiopian Airlines Flight 302 crashed on March 10. Last week, airlines and aviation regulators around the world grounded the plane, forcing the FAA to do the same. Then came a string of embarrasing revelations, including the fact that FAA managers had pushed its safety personnel to delegate assessment of the plane’s safety to engineers at the company.
On Wednesday the Seattle Times reported that the FBI had joined a criminal investigation into the certification of the 737 MAX that had been launched by the U.S. Department of Justice and Department of Transportation.
Yesterday it was revealed that neither the Lion Air nor the Ethiopian Airlines plane had been supplied with two optional safety features that would have provided the pilots visual cues regarding the key sensor whose failure is believed to have triggered the crash. The Times reported that Boeing will start providing one of those features as standard equipment.
Boeing has endured furors over aircraft flaws before. Shortly after it introduced its most recent all-new design, the 787, the fleet was grounded for four months after several planes’ lithium-ion batteries caught fire. But no passengers were injued in those incidents, and as they faded into the background they came to seem like the kinds of teething pains you often see in an all-new design.
To find an aircraft that has had such a pall cast over it, you have to go back to the de Havilland Comet, an early passenger jet that first flew in 1949. A design flaw caused two of the planes to break up in midair, killing everyone onboard, and even after the problem was fixed the Comet had a reputation as a death trap. Orders dried up, and in 1960 de Havilland was absorbed by Hawker Siddeley.
Boeing is a corporation of a different order of magnitude than de Havilland ever was, though. A product of an age of consolidation, it in recent years has swallowed up competitors such as McDonnell Douglas and Rockwell International, and joined with rival Lockheed Martin to form the space-rocket builder United Launch Alliance. With $100 billion in annual revenue, it ranks as the United States’ largest exporter. And it has enormous political pull: The acting secretary of defense, Patrick Shanahan, was an executive at Boeing for 30 years. Reportedly Trump didn’t make his announcement about the grounding of the 737 MAX fleet until after Boeing CEO Dennis Muilenburg gave him his approval over the phone.
If any company has the wherewithal to weather a storm it is Boeing. But at this point there’s no way to know how big the storm could become.
As veteran aviation journalist Jon Ostrower points out on the website the Air Current, Boeing’s short-term future is clouded by the fact that it is coming off a decade of overproduction fed by low oil prices and rapid airline growth around the world. Now that that breakneck growth is cooling, the global aviation industry might have more airliners than it needs. The last time demand collapsed, amid the post-9/11 recession, Boeing’s deliveries fell by more than half from its 1999 peak and stayed low for three years. Even that wasn’t as bad as the early ‘70s, when it went more than a year without receiving any new orders from a U.S. airline and wound up laying off half its workforce.
Still, amid all that turmoil, Boeing survived. So you could read the lessons of history as showing just how bad things could get. Or you could take them as showing how much punishment Boeing can absorb and still keep soldiering on.
