In the aftermath of the Jet Airways flight suspension, many people are asking questions about what will happen to their stranded passengers, loyal staff and $26bn worth of Boeing 737 MAX orders.
Right before their suspension, Jet Airways had 141 orders for the Boeing 737 MAX 8, 75 for the 737 MAX 9 and had already received five aircraft from Boeing. In hindsight, this order is now controversial as the 737 MAX has been grounded due to two crashes and over 300 deaths.
How much was the order worth?
One thing to take with a pinch of salt when it comes to aviation orders is the large numbers airlines throw around.
What is the ‘list price’ of an aircraft? This price is just the market value of the aircraft with inflation taken into consideration. Manufacturers do this to account for the price of aircraft changing over the years (after all sometimes it can take years to deliver one order) and to take into consideration currency fluctuations (Airbus sells its aircraft in Euros and Boeing in Dollars).
Furthermore, airlines never actually pay the ‘list price’. If you were an airline and you ordered 100 aircraft, there is no way that you wouldn’t get a discount. Especially with Airbus/Boeing looking over your shoulder and whispering their alternatives in your ear. Thus we know from those close to negotiations that many airlines pay around 50% the list price.
So how much was the Jet Airways order worth?
- Boeing 737 MAX 8 – US$121.6M x 141 = $17,145.6M ($17 Billion)
- Boeing 737 MAX 9 – US$128.9M x 75 = $9667.5M ($9.6 Billion)
- Total: $26 Billion USD
But if we were to consider the above, it’s likely they only paid 50% of the actual price – $13 Billion USD
Why did Jet Airways suspend flights?
This topic has already been covered in plenty of depth here, but essentially Jet Airways was unable to remain profitable in current market conditions, could not find support from other backers and thus had to close.
It means they owe plenty of money and are having their aircraft (those that are leased) impounded. Just before they went under, they were only flying five aircraft.
The fact of the matter is that this order to Boeing is almost guaranteed to be completely dropped unless Jet Airways can find a buyer. But even if Jet Airways was still operational and solvent, it is possible that they would have never accepted the order.
Would Jet Airways accepted the aircraft?
This is a much harder question to answer.
The 737 MAX 8 program has faced plenty of controversies. After two terrible crashes and unforgivable loss of life, many are starting to wonder if Boeing rushed the fourth generation of the 737 program (You can see the differences of each here) and if the plane has a place in their fleets.
If Jet Airways had not suffered its current fate, it might have canceled the order (they were already greatly affected by the 737 MAX 8 aircraft being grounded worldwide, with five of their own aircraft caught in the fray) and expected compensation from Boeing.
But in reality, losing the order from Jet Airways is just the tip of the iceberg for Boeing. 60-80% of their entire future order book is made up of the 737 MAX family, and we might expect to see many more stories just like this one in the future.
What do you think? Let us know in the comments below.