No solution yet over 737 Max orders

Talks are still ongoing and any resolutions are not expected anytime soon, says group CEO

by RAHIMI YUNUS / pic by BLOOMBERG

MALAYSIA Airlines Bhd (MAB) is still ironing out a solution over the RM23 billion purchase of Boeing 737 Max, which continues to be grounded and is costing billions of dollars in losses to the global aviation industry.

The loss-making national carrier ordered 25 737 Max from Boeing Co with another 25 purchase rights in a deal valued at US$5.5 billion (RM23 billion). The delivery of the planes is expected to start next year.

But two incidents involving Boeing’s best-selling jetliner that claimed the lives of 346 people, forced aviation authorities around the globe to temporary end the aircraft flying time.

MAB group CEO Captain Izham Ismail said talks with the Seattle-based plane maker are still ongoing and any resolutions are not expected anytime soon.

“We are still in discussion for options with Boeing on Max 8. It is a long process,” Izham told The Malaysian Reserve recently.

It is not known whether the agreement between MAB and Boeing provides for cancellation as the latter continues to grapple to find a solution after two of the narrow-body twin-engine jetliners crashed after takeoff.

MAB is not the only carrier which is facing a dilemma over its orders. In July, Saudi Arabian low-cost carrier (LCC) Flyadeal became the first carrier to cancel the 737 Max orders, axing its 50 orders worth US$5.9 billion. The carrier instead chose A320neo from Boeing’s competitor, Airbus SE.

Europe’s largest LCC Ryanair Ltd has reportedly dropped the word “Max” on the plane livery, signalling a rebranding of the aircraft for re-entry to service.

Airbus is seen profiting from Boeing’s 737 Max predicaments as carriers look for substitutes.

MAB is in dire financial straits over its future, including whether the government will pare down its stakes to save billions of taxpayers’ money. Billions have already been spent on the carrier, including the RM6 billion capital injection in 2014.

Cancellations of the Boeing 737 Max could provide a respite to the carrier which is formulating another turnaround plan.

The grounding of Boeing 737 Max, which enters the sixth month, had impacted the industry. Carriers across the globe had cancelled thousands of flights as the plane was removed from operation. Hiring of pilots had been halted and carriers’ expansion hit a wall.

Carriers like MAB are talking to Boeing as they await aviation authorities’ green light over the safety of Boeing 737 Max.

Boeing, the world’s largest plane manufacturer had suffered US$4.9 billion in losses related to the global grounding of the 737 Max.