Complex Made Simple

Did Boeing just lose a $5.9 billion order? Not exactly…

Flyadeal seems to have scrapped a provisional deal worth $5.9 billion for Boeing MAX planes in favor of Airbus, but it's not as big of an issue as one might think.

Flyadeal will begin receiving jets from Airbus starting 2021 Expert Saj Ahmad clarifies what exactly happened for flyadeal to abandon the Boeing order, and why it's a non-issue Boeing has yet to submit a fix to the FAA addressing the issue that is believed to have caused the crashes in the first place

After seeing its planes grounded and billion of dollars of share value lost, Boeing has now supposedly received another ‘blow’ to its jet order backlog.

Flyadeal, a budget airline and subsidiary of state-owned Saudia Airlines, has foregone a provisional $5.9 billion order for 30 737 MAX jets (with an option for an additional 20), announcing on Sunday that it will be “operating an all-Airbus A320 fleet in the future.” The Airbus A320neo is the jet-class rival of the 737 MAX 8s and 9s. 

While it might seem that this is direct collateral damage to the company from the 737 MAX controversy, Saj Ahmad, Chief Analyst at StrategicAero Research, told AMEinfo otherwise. 

“For a start, flyadeal never actually had a firm order for the MAXs, so there’s no immediate financial impact to Boeing at all,” he said. “Further, for this to be seen as a ‘blow’ to Boeing is a mish-mash of untruths – of course Boeing would have loved to have added this order to its books, but that the deal was never firmed means that there’s no material loss either.”

Back in December of 2018, Boeing noted at the time that flyadeal was committed to ordering 30 airplanes with options for 20 more, in a deal that would be valued at up to $5.9 billion at list price. The airline would have likely received discounts for their significant order.

“If anything, the over-ordering by Saudi Arabian Airlines’ narrowed fleet means that they had to plan and deploy them somewhere – and given that flyadeal wanted new jets, this seemed a logical move to take the A320neo’s from Saudi Arabia’s existing orderbook,” Ahmad continued.

“The flyadeal decision points more to having to do something with the slew of A320neo’s ordered and having to home them rather than anything to do with the MAX,” he concluded.

Flyadeal will receive the A320s starting 2021. 

A Boeing spokesperson told Reuters: “We understand that flyadeal will not finalize its commitment to the 737 MAX at this time given the airline’s schedule requirements.”

Boeing has been mired in controversy ever since its 737 MAX jets were involved in 2 separate crashes that resulted in the deaths of 347 people. Its planes have been grounded since, and some airlines, like Oman Air, have warned that they would turn to Airbus if Boeing “did not provide support and recovery for the MAX,” as per Reuters. 

The crashes are believed to have occurred due to an issue with the MAX planes’ MCAS system, a flight-control software that is responsible for support in the balancing of the plane’s jet nose. Boeing has supposedly completed a fix, but has yet to announce that it has submitted it to the US Federal Aviation Association for revision and approval.