MAB suspends 737 Max deliveries

by RAHIMI YUNUS / pic by BLOOMBERG

MALAYSIA Airlines Bhd (MAB) has suspended the delivery of Boeing Co’s 737 Max due this year as the prospect of the aircraft’s return to service remains uncertain.

The national carrier said it continues to discuss the matter with Boeing and is waiting for regulators’ decision on the return of the US planemaker’s fastest-selling jet to commercial flight before determining the next course of action.

“There is no clarity yet from various authorities on its return to service. Therefore, we will not be taking delivery of the scheduled aircraft this year as planned, hence, the suspension. MAB is in discussions with Boeing on this matter,” MAB told The Malaysian Reserve (TMR) in a text reply yesterday.

“MAB has a firm order of 25 Boeing 737 Max aircraft and we await decisions by the US Federal Aviation Administration and other regulatory bodies before deciding on the next steps,” it added.

MAB said the decision to halt the 737 Max deliveries is a result of Boeing’s move to suspend the single-aisle aircraft production starting this month.

On Dec 16, Boeing said the production of the airplane programme was suspended as the “Max grounding continues longer than we expected”, citing certification has extended into 2020.

Meanwhile, Boeing decided to prioritise the delivery of about 400 units stored aircraft.

The Chicago-headquartered planemaker was dealt a fresh blow after revelations of embarrassing communications among employees who labelled the 737 Max as “designed by clowns…supervised by monkeys”.

MAB ordered 25 737 Max jets with another 25 purchase rights in a deal valued at US$5.5 billion (RM23 billion) in 2017.

The first delivery of the aircraft was previously set for July 2020.

MAB group CEO Captain Izham Ismail previously told TMR that the discussion with Boeing was a “long process”.

It is not known whether the agreement between MAB and Boeing provides for termination or swap options.

No Malaysian carriers operate the 737 Max.

An analyst said the delivery suspension would affect MAB’s route expansion, but added that the halted delivery would relieve funding issues faced by the airline.

“Yes, it would affect route expansion plans. But I think MAB’s focus should not be on that, but more on optimising the cost structure and

upping yields through route optimisation. They have major codeshare deals with Singapore Airlines Ltd and Japan Airlines Co Ltd to leverage on the networks,” said the analyst who requested anonymity.

The analyst said the suspension of the 737 Max orders would be positive in balancing the immediate demand and supply dynamics to enable airlines to gain higher yields.

MIDF Amanah Investment Bank Bhd analyst Adam Mohamed Rahim said the absence of capacity of the 737 Max would give an advantage to other airlines, particularly AirAsia Group Bhd.

“We opine that AirAsia is set to benefit from the suspension of delivery of Boeing 737 Max and further strengthen its market share above 60% in Malaysia, especially during a year in which tourism activity is expected to boom in conjunction with the Visit Malaysia 2020,” Adam told TMR.

Adam said AirAsia is expected to add four new aircraft this year, three units of A321neo and an A320neo.

Last year, AirAsia converted 253 orders for A320neo to the larger A321neo, making a total of 353 orders and being one of the largest customers for Airbus SE, an archrival of Boeing.

Boeing has suffered over US$4 billion in losses related to the global grounding of the 737 Max, and is working around the clock to find a solution on its technical flaws.