ALAFCO Sues Boeing Over 737 MAX Order Cancellation

Kuwaiti aircraft lessor ALAFCO has filed a US$336 million lawsuit against Boeing on Wednesday. The lessor believes that Boeing is in breach of contract for not returning advance payments for 40 aircraft.

ALAFCO, Boeing, Court Case
ALAFCO is taking Boeing to court over advance payments for canceled Boeing 737 MAX orders. Photo: Boeing

We’ve recently seen several Boeing 737 MAX orders canceled. The cancelations come as the aircraft type has now been grounded for over a year following two fatal crashes. Now, according to Reuters, the Kuwait-based aircraft leasing company has taken Boeing to court over its order cancellation. The publication states that ALAFCO claims that repayments are due because of a “non-excusable delay.” Let’s take a look.

40 737 MAX orders

According to Boeing’s order book as of the 31st of March, ALAFCO has 40 737 MAX aircraft on order. The airline initially committed to 20 of the 737 MAX-8 at the Farnborough Airshow in 2012 valued at $1.9 billion at list prices. The aircraft lessor then went on to firm up this order in November of that year.

However, ALAFCO decided that it wanted more Boeing 737 MAX aircraft. At the 2017 Paris Air Show, the company doubled its 737 MAX-8 order to 40 of the aircraft. By this point in time, the list price of 20 MAX-8s had increased to $2.2 billion. In January, Simple Flying caught up with ALAFCO, or the Aviation Lease and Finance Company, at the Kuwait Air Show. A spokesperson at the time had discussed the possibility for seeking compensation.

Boeing 737 MAX, Grounding, One Year
The Boeing 737 MAX has now been grounded for 13 months. Photo: Getty Images

Order cancellation

ALAFCO has now canceled its Boeing 737 MAX orders, according to Reuters. However, it has been claimed that Boeing is refusing to refund advance payments that have already been made by ALAFCO. This is the core of the new legal issue.

ALAFCO has filed a complaint at the Chicago Federal Court regarding the matter. The suit, filed for an amount of $336 million, claims that the American manufacturing giant’s refusal to return funds already paid is wrongful. It states that repayment is justified as the grounding of the Boeing 737 MAX is a “non-excusable delay.”

This isn’t the first time a court case has been brought by an aircraft lessor regarding a Boeing 737 MAX cancellation. In December we reported that Timaero Ireland Ltd was suing Boeing over a breach of contract regarding the MAX. At the time, Timaero told Reuters, “The 737 MAX aircraft contracted for between Boeing and Timaero are now either worthless or seriously diminished in value.”

Ryanair, Boeing 737 MAX 10, New Order
Many airlines are still standing by their 737 MAX commitments. Photo: Getty Images

In March, 150 orders for the Boeing 737 MAX were canceled. This followed the cancellation of 59 orders for the aircraft in February. With no set date for the aircraft’s return to the skies, it is possible that we could still see more cancellations. However, many other airlines are still sticking by their commitment to the aircraft.

Simple Flying has contacted Boeing for comment regarding this story. We will, of course, update this story as appropriate when a response is received.

Do you think Boeing should refund ALAFCO’s advance payments? Let us know what you think and why in the comments!