/Huge Boeing 737 Max Order Canceled As Criminal Probe Heats Up

Huge Boeing 737 Max Order Canceled As Criminal Probe Heats Up

Garuda Indonesia said Friday it’s canceling an order for Boeing (BA) 737 Max jets, marking the first airline to publicly confirm such a move following the Ethiopian Airlines crash earlier this month.


In 2014, the Indonesian flag carrier ordered 50 737 Max jets worth about $4.9 billion at list prices, though airlines typically get discounts for big orders. Garuda has taken delivery of one and is canceling the remaining 49.

Garuda may order another Boeing jet instead, according to reports. The airline said it sent a letter to the company March 14, and Boeing executives plan to meet with Garuda March 28.

Other airlines, including Indonesia’s Lion Air, have also talked about canceling their 737 Max orders or said they will reconsider them.

The Ethiopian Airlines crash was the second in five months, following a fatal Lion Air crash in October. The Boeing 737 Max was grounded earlier this month as the Federal Aviation Administration and other global aviation agencies found similarities between the two crashes that have killed 346 people.

Boeing shares fell 1.7% to 366.24 on the stock market today, continuing to trade between its 50-day and 200-day lines. Airbus (EADSY) U.S.-listed shares dropped 3%.

The iShares U.S. Aerospace & Defense ETF (ITA) and SPDR S&P Aerospace & Defense ETF (XAR) were both off 1.4%.

737 Max Software Updates

Meanwhile, Boeing is working to implement changes to software and training for the Boeing 737 Max.

“We have gone through steps such as working with it in a simulator, we flight tested the improvements and we are working with the FAA toward certification and we believe that will happen in coming weeks,” the VP of marketing, Randy Tinseth, said Thursday at an investors conference, according to CNBC.

Changes will include and update of displays and updates to the flight manual. Tinseth said he still has “great confidence” in the Boeing 737 Max.

American Airlines (AAL) pilots will test new  software in simulators this weekend, according to Reuters.

But the Boeing 737 Max flight simulator also isn’t configured to simulate the problems with the flight control system that lead to the deadly crash earlier this month that killed 157, Ethiopian Airlines tweeted Thursday.

The Ethiopian Air and Lion Air jets also weren’t equipped with an angle of attack indicator or an angle of attack disagree light, according to a New York Times report.

Boeing reportedly charged extra for the safety features and they are not standard on the 737 Max. Neither are required by the FAA.

“They’re critical, and cost almost nothing for the airlines to install,” said Bjorn Fehrm, a Leeham analyst told the Times. “Boeing charges for them because it can. But they’re vital for safety.”

The report said that Boeing will make the light standard but the angle of attack indicator will remain a costly extra feature.

Boeing 737 Max Criminal Probe Intensifies

The Justice Department has issued multiple subpoenas in its investigation into the development of the Boeing 737 Max, sources told CNN.

Investigators have asked Boeing for information on the safety and certification procedures and its marketing, according to the report.

The Justice Department probe of the Boeing 737 Max is highly unusual, involving a prosecutor in the criminal division’s fraud section. Typical safety probes are civil cases handled by the Transportation Department’s inspector general, the Wall Street Journal said earlier.

The Transportation Department launched its own inquiry after the Lion Air crash into the analysis of the automatic flight control system.

The Federal Bureau of Investigation is also participating in the criminal probe of the Boeing 737 Max certification, the Seattle Times reported late Wednesday.


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