With the crush of headlines about Boeing’s 1st quarter earnings, there has been little publicity about Garuda’s cancelled order for 737MAX8, which will be replaced with an order for the 737MAX10 and 787s. While details have not been fully disclosed, the Garuda deal that was cancelled could have had Garuda walking away from Boeing to Airbus. That hasn’t happened, and the order has remained with Boeing.
As a result, there should be little or no revenue impact to Boeing
, and Garuda’s deferral of deliveries until 2020 actually helps Boeing balance its production skyline. This piece of positive news has been under-reported in the media.
Analysis
Cancelling an aircraft order is a difficult process, and often quite costly for an airline. A series of non-refundable progress payments are made when an order is confirmed and in stages throughout the production process until delivery. An order cancellation, under typical contractual terms, can become very expensive.
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