Despite inching closer to recertification, the Boeing 737 MAX orderbook keeps taking hits. Irish aircraft leasing company Avolon has recently canceled an order for another 27 of the beleaguered jets, in addition to the 75 the company dropped in the first quarter of 2020.
There was some relatively good news last week for the Boeing 737 MAX. The model completed a series of test flights over the space of three days, for a total flying time of just over ten hours. This is a crucial step on the path towards recertification. The latest estimates are that the plane will be ungrounded, at least by the FAA, sometime mid-September.
Unfortunately for Boeing, the lengthy grounding of the plane, along with a nearly incomprehensible economic downturn for commercial aviation in the wake of the pandemic, it is too little, too late for many of its customers.
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MoU for 125 MAXs
The latest in a long list of the manufacturer’s clients to cancel more of its orders for the 737 MAX is Irish aircraft leasing company Avolon. In its business update for the second quarter of 2020, the company states that it has canceled commitments to acquire 27 737 MAX aircraft from 2020 to 2022. This was in addition to the orders for 75 737 MAXs already canceled in the first quarter of the year.
The memorandum of understanding (MoU) between Avolon and Boeing for the 75 MAXs was signed in 2017. While the 75 were valued at $8.4 billion at list price, the MoU contained an option for another 50 of the aircraft, as reported by Reuters at the time.
This means that from the initial intention from that order to acquire 125 MAX jets, Avolon is now down for merely 23, which remain an option. Needless to say, this is a massive economic hit for Boeing.
Current fleet includes nine MAXs
The large order came only a month after Avolon delivered the world’s first 737 MAX to Malindo Air. The Malaysian low-cost carrier took delivery of the plane on May 16th, 2017.
According to the aircraft lessor’s website, it now owns nine 737 MAXs, some of which are leased to Lion Air, SpiceJet, WestJet, and MIAT Mongolian Airlines. The MAX involved in the fatal Lion Air crash was not leased from Avolon, however, but from a company called China Minsheng Investment Group (CMIG) Aviation Capital.
Avolon states it still has commitments for another 37 of the aircraft.
Out of the 400 aircraft cancellations since the beginning of the year, the 737 MAX accounts for a whopping 313 of them. This is despite the fact that long-haul air travel is expected to bounce back slower than short and medium, and so widebody orders should, potentially, have taken a greater hit.
However, when coupled with the immediate need for fleet reduction and liquidity generation, the tarnished reputation, lethal history, and grounding hassle of the 737 MAX have made it the first to hit the chopping block.
What do you believe the future holds for the 737 MAX? How long will it be before airlines and lessors renew their orders for the model? Let us know in the comments.