Saudi Airline First to Cancel Boeing 737 MAX Order

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Saudi Arabian Airlines’ (Saudia’s) budget carrier, Flyadeal, has canceled a commitment to order placed last December for 30 Boeing Co. (NYSE: BA) 737 MAX jets, along with options for 20 more of the new jets. The airline said in a statement Sunday that it will instead order 30 Airbus A320neo jets with an option for 20 more. Flyadeal is the first airline to cancel completely an order or commitment for the 737 MAX.

The announcement comes on the heels of last month’s Paris Air Show where Saudia signed a deal with Airbus for a total of 100 new aircraft. According to the press release, Flyadeal will maintain an all-A320 fleet going forward. Deliveries of the new planes are scheduled to begin in 2021.

Boeing reacted to the news with an email statement to Bloomberg: “We understand that Flyadeal will not finalize its commitment to the 737 Max at this time given the airline’s schedule requirements. We wish the Flyadeal team well and hope we can support their fleet and operational needs in the future.”

The Saudia budget airline, along with Nigeria’s Green Africa Airways, were the first to commit to purchasing more 737 MAX jets following the October crash of a Lion Air plane that killed all 189 passengers and crew. Lion Air has threatened to cancel an order for 200 (14 have been delivered) of the Boeing jets but it still appears on Boeing’s order book. At list prices, the order is valued at around $5.9 billion.

Boeing is blaming the loss of Flyadeal’s order on scheduling problems due to the worldwide grounding of the 737 MAX following a March crash in Ethiopia that killed 157 people. The company continues to work on a fix for the faulty anti-stall system that is widely believed to have been responsible for the two deadly crashes.

The company continues to build the plane at a reduced rate of 42 a month (down from 52 previously) but is parking them at locations near Seattle and at a Boeing facility near San Antonio, Texas. More than 100 of the new jets are not going anywhere until the 737 MAX is certified to fly again.

Boeing’s shares traded down about 1.3% at $351.10 in Monday’s premarket. The stock’s 52-week range is $292.47 to $446.01 and the consensus 12-month price target is $420.14.


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