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Aviation

Lion Air may cancel US$22 billion in Boeing orders, as airline’s co-founder Rusdi Kirana rages over US plane maker’s bid to avoid crash blame

  • US$22 billion in orders from Boeing hang in the balance in the aftermath of the Lion Air crash that killed 189 people
  • Lion Air co-founder Rusdi Kirana believes Boeing has tried to deflect blame away from design changes made to its 737, sources say
PUBLISHED : Tuesday, 04 December, 2018, 1:00am
UPDATED : Tuesday, 04 December, 2018, 8:57pm

Indonesia’s Lion Air is reviewing aeroplane purchases from Boeing and has not ruled out cancelling US$22 billion in orders as relations worsen over responsibility for a 737 jetliner crash that killed 189 people in late October.

Co-founder Rusdi Kirana is furious over what he regards as attempts by Boeing to deflect attention from recent design changes and blame Lion Air for the crash, while the airline faces scrutiny over its maintenance record and pilots’ actions.

Kirana is examining the possibility of cancelling remaining orders of Boeing jets “from the next delivery”, according to a person familiar with his thinking. Another source close to the airline said it was looking at cancelling orders.

A former group CEO who now serves as Indonesia’s ambassador to Malaysia, Kirana remains closely involved with Lion Air and hosts a monthly meeting in Kuala Lumpur with the heads of the group’s airlines based in Indonesia, Malaysia and Thailand.

No final decision has been made, but discussion over the fate of billions’ worth of remaining orders highlights the stakes surrounding an investigation involving Boeing’s fastest-ever selling jet, the 737 MAX, which entered service last year.

Doomed Lion Air jet was airworthy, Indonesian crash investigators now say

Lion Air has 190 Boeing jets worth US$22 billion at list prices waiting to be delivered, on top of 197 already taken, making it one of the largest US export customers.

Any request to cancel could be designed to put pressure on Boeing and would likely trigger extensive negotiations. Many airlines defer orders, but industry sources say aerospace suppliers rarely allow much scope for unilateral cancellations.

Lion Air declined to comment. It was also not immediately clear how much of the airline is owned by Kirana. A Boeing spokesman said: “We are taking every measure to fully understand all aspects of this accident, and are working closely with the investigating team and all regulatory authorities involved. We are also supporting our valued customer through this very tough time.”

Boeing eyes software upgrade for popular 737 as Lion Air flight’s airworthiness comes under scrutiny

Kirana, who co-founded the airline with his brother in 2000, ordered the review of airline purchases in response to a Boeing statement focusing attention on piloting and maintenance, the person said.

Boeing released the statement focusing on maintenance actions spread over four flights in the run-up to the fatal flight on October 29, after investigators issued an interim report that did not give a cause for the crash.

Boeing is also examining software changes in the wake of the crash, while insisting long-standing procedures exist for pilots to cancel automated nose-down movements experienced by the 737 MAX in response to erroneous sensor readings.

It has come under fire from US pilots for not mentioning the MCAS system – a modification of existing anti-stall systems – in the manual for the 737 MAX, which began service last year.

“Why are they changing [software] if there was nothing wrong?” the person familiar with Kirana’s thinking said.

Boeing has said all information needed to fly the 737 safely is available to pilots and that its workhorse model is safe.

The row highlights an unusually polarised dispute over the causes of the crash. Experts say most accidents are caused by a cocktail of factors and parties rarely comment in detail before the final report, which often follows a year of analysis.

In its statement, Boeing recapped the interim report and listed questions on maintenance and pilot behaviour that it said remained unanswered in the 78-page document, but did not mention the MCAS modification covered in an earlier safety bulletin.

It is not the first time an airline has crossed swords with its supplier after a crash.

Lion Air’s rival AirAsia Group Bhd clashed with Airbus SE after its Indonesian subsidiary lost an A320 in 2014. It continued to take deliveries, but relations never fully recovered and it later toyed with buying 787s from Boeing.

Some financial sources say Lion Air and southeast Asian rivals over-expanded and would be comfortable with fewer orders.

But the row highlights an unusually polarised dispute over the causes of the crash. Experts say most accidents are caused by a cocktail of factors and parties rarely comment in detail before the final report, which often follows a year of analysis.

In its statement, Boeing recapped the interim report and listed questions on maintenance and pilot behaviour that it said remained unanswered in the 78-page document, but did not mention the MCAS modification covered in an earlier safety bulletin.

It is not the first time an airline has crossed swords with its supplier after a crash. Lion Air’s rival AirAsia clashed with Airbus after its Indonesian subsidiary lost an A320 in 2014. It continued to take deliveries, but relations never fully recovered and it later toyed with buying 787s from Boeing.