NORWEGIAN Air Shuttle has notified Boeing that the carrier is terminating purchases for all 97 of its remaining jets on order, underscoring the financial strains caused by a 15-month grounding of the 737 Max after two fatal accidents.
In more bad news for Boeing, Singapore-based lessor BOC Aviation said in a filing yesterday that it was scrubbing an order for 30 Max jets and deferring other deliveries.
As cash-strapped carriers seek to halt or postpone jetliner deals, the grounded Max makes the US planemaker more vulnerable than Airbus to single-aisle cancellations.
Buyers often have the right to walk away from deliveries that have been delayed more than a year without risk of penalties, and for some 737 customers that's potential leverage to gain a cash settlement from Boeing rather than discounts on future orders.
Kuwaiti lessor Alafco Aviation Lease and Finance sued Boeing earlier this year, seeking to scrap an order for 40 Max and reclaim the $336m (€299m) it said it had paid in advance for the aircraft.
"Boeing is walking a fine line," Douglas Harned, an analyst at Sanford C. Bernstein, said of Norwegian's move.
"Our understanding is that others are looking to sue as well. While Boeing could pursue a technical legal argument that these are excusable delays, we doubt it would want that debate out in public," he said. "But, we also do not expect Boeing to roll over and set a precedent that it would return progress payments to any airline that wants them in an environment where no one wants deliveries."
Boeing dropped 5.2pc to $184.35 in New York. Shares of the US planemaker had surged 14pc on Monday on the first test flight toward recertification of the Max. The single-aisle workhorse has been grounded since March 2019.
Norwegian's decision covers 92 of Boeing's Max narrow-body planes, five of the long-distance 787 Dreamliners and a related maintenance pact, the carrier said in a statement. The airline, which last month reached a rescue deal with its lenders after the coronavirus decimated air travel, also threatened to turn to the courts to gain pre- delivery payments for the jets plus compensation tied to the Max's 15-month idling.
The termination roils Boeing's relations with one of its largest customers in Europe, even if Norwegian's own troubles had cast doubt on its ability to take all the planes. It has converted about $1.5bn (€1.35bn) of debt into equity and accessed government loan guarantees to avoid collapse.
As part of the rescue, Norwegian plans to shrink its current 160-aircraft fleet. It's also halted most of its long-haul flights until April. This month, the carrier said it would restart 76 routes in Europe as travel restrictions were eased, allowing it to tap into the usually lucrative summer season.
The cancelled aircraft are worth at least $10.6bn based on list prices, before customary discounts.
Norwegian is still seeking to work out an agreement with Boeing on compensation, a source said. The carrier hasn't decided whether to continue using the 737 Max aircraft - of which it has 18 in its fleet - once the plane is re-certified.
Norwegian is flying only 13 domestic flights, operated by eight aircraft. The airline will increase capacity to 20 planes, adding routes to European cities including London, Paris and Barcelona. It's also bringing back about 600 pilots and cabin crew from furlough.