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Last Updated : Mar 15, 2019 11:01 AM IST | Source: Moneycontrol.com

Orders worth $600bn at risk for Boeing 737 MAX as buyers turn wary

Before the cause of the Ethiopian Airlines crash is ascertained, companies are wary of extending their contracts with Boeing

The grounding of Boeing's 737 MAX aircraft following the crash in Ethiopia on March 10 is set to cost the company orders worth $600 billion. Many of Boeing's customers have started to reconsider their orders for the model after the crash, which is a second such incident after the Lion Air crash in October 2018.

Before the cause of the crash is ascertained, companies are wary of extending their contracts with Boeing. VietJet Aviation had placed an order for the aircraft valued at $25 billion, double its last order, but is now awaiting more information on the crash. Russia's Utair Aviation is seeking more clarity as well. Kenya Airways may also switch to Airbus SE, which is MAX's main competitor, but may not desert Boeing altogether, Bloomberg reported.

Indonesia's Lion Air, after the deadly crash of October 2018, has dropped a business order for 737 MAX worth $22 billion. After the accident, which killed 189 people, the airline was considering ending its relationship with Boeing. So, the latest incident will only fuel this process.

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Saudi Arabian Airlines are also rethinking a $5.9 billion contract. Flyadeal, which is a unit of the Saudi Arabian Airlines, had announced in December that it would shift from Airbus to Boeing and buy 50 737 MAX jets. But the transaction has been put on hold as of now.

The 737 was the best-selling model in the aviation industry and was the top earner for Boeing. The re-engineered version, MAX, has over 5,000 orders worth over $600 billion. This includes planes that have been delivered.

The underlying reason for the Lion Air crash five months ago was found to be maintenance issues and human error. However, in the Ethiopian crash, there is a concern that one of the features in the upgraded 737 MAX model have made it harder to operate.

Most of the countries have grounded the planes, including the US, China, India, Brazil and many countries of the European Union. This has dragged down Boeing's shares by nearly 11 percent this week.

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First Published on Mar 15, 2019 11:01 am
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