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Boeing: from loser to winner as Garuda adjusts order
May 3rd 2019
Garuda will keep 737 MAX order but up-gauge and take 787s. Read More »
Garuda Indonesia has made a second U-turn. But rather than end up where it started, Garuda – and Boeing – are likely in a better position.
Garuda Indonesia in March said it would cancel its 737 MAX order after the type had two crashes. A spokesperson bluntly said: “Our passengers have lost confidence to fly with the MAX 8.” Garuda had ordered 50 737 MAX 8s and received one.
But Garuda President Ari Ashkara told the Nikkei Asian Review that Garuda will substitute the order for 737 MAX 10s and 787s. He did not disclose the number of each, but said the value of the order would be approximately the same, implying a decrease in aircraft.
For Boeing this is likely an increase in profit as larger narrowbodies and widebodies are generally more profitable. Once confirmed, this would bring the 787 to Garuda’s books for the first time. Garuda in 2015 announced its intent to order 30 787-9s but never finalised the deal. Garuda also announced it wanted to acquire 30 A350s and A330neos.
Garuda’s initial announcement was met with scepticism since the airline had previously discussed wanting to defer deliveries, suggesting Garuda’s cancellation request was a business decision cloaked as a passenger referendum.
Rational thinking suggests passengers at large will forget the MAX issues once rectified. Even if Garuda sticks to its point the MAX 8 has a tarnished reputation. Passengers may not understand the subtlety of the MAX 10.
Swapping the MAX 8 to MAX 10 gives lower costs, but more crucially more capacity as Indonesia’s airports become more constrained without sweeping growth plans. Airlines are up-gauging narrowbody models. LCCs, once staunch proponents of single fleet types, are quickly warming to larger narrowbodies.
