Norwegian Air scraps US$10.6b deal for Boeing 737 Max, 787 jets

Chicago

NORWEGIAN Air Shuttle ASA has notified Boeing Co that it is terminating purchase agreements for all 97 of its remaining jets on order with the US planemaker.

The decision covers 92 of Boeing's 737 Max planes, five 787 Dreamliners and a related maintenance pact, Norwegian said in a statement on Monday. The airline, which is restructuring after the Covid-19 virus decimated trans-Atlantic travel, said it also filed a legal claim seeking the return of pre-delivery payments for the jets plus compensation tied to the Max's 15-month grounding.

Talks with Boeing have "not led to an agreement with a reasonable compensation", Norwegian said in the statement. The aircraft are worth at least US$10.6 billion based on list prices before customary discounts.

The termination roils Boeing's relationship with one of the company's largest customers in Europe, even if Norwegian's financial troubles had cast doubt on its ability to take all the planes. Norwegian converted debt to equity and sold new shares in May in order to get access to government loan guarantees in its home market, saving it from collapse after the pandemic gutted demand for air travel.

"We are not going to comment on commercial discussions with our customers," Boeing said in a statement. "Norwegian Air Shuttle is a longstanding Boeing customer. As with many operators dealing with a very challenging time, we are working on a path forward."

Boeing fell one per cent to US$192.50 in late Monday trading in New York. The shares surged 14 per cent during the regular session as Boeing and US officials conducted the first test flight in a process to regain certification for the Max from the Federal Aviation Administration. The single-aisle workhorse has been grounded since March 2019 following two deadly crashes.

As cash-strapped carriers seek to halt or postpone jetliner deals, Boeing is more vulnerable to single-aisle cancellations than Airbus SE. Buyers typically have the right to walk away from deliveries that have been delayed more than a year without risk of penalties. Boeing has recorded cancellations for 313 Max planes so far this year.

Kuwaiti lessor Alafco Aviation Lease and Finance Co sued Boeing earlier this year, seeking to scrap an order for 40 Max and reclaim the US$336 million it said it had paid in advance for the aircraft. BLOOMBERG