[JAKARTA] Five months after a Boeing 737 Max aircraft operated by Lion Air crashed into the Java Sea in 2018, Indonesian flag carrier Garuda Indonesia tried to cancel its remaining order for the same model. Now, the country is working to revive that deal as it seeks to forge favourable ties with US President Donald Trump’s administration.
Trump announced in a social media post on Tuesday (Jul 15) that Indonesia will order 50 aircraft, including “many” of Boeing’s larger 777 planes. While Trump did not disclose a buyer, Garuda chief executive officer Wamildan Tsani Panjaitan had previously said he’s in talks to buy 50 to 75 Boeing aircraft, including 737 Max and 787-9 Dreamliner models.
The accord points to the intertwined political and economic interests whenever Trump negotiates with foreign leaders. The US President has previously announced aircraft purchases while visiting countries including Qatar, or when he’s hammered out trade agreements with the likes of Vietnam or the UK. In Indonesia’s case, Trump said he got the deal over the line in direct negotiations with President Prabowo Subianto during a phone call.
The dilemma for Boeing is how to restore or expand the existing 49-jet Max order without leaving Garuda in a financial and strategic bind. The airline is already having trouble keeping its existing fleet airworthy, with at least 15 jets grounded as recently as May, as it struggles to make maintenance payments.
At the same time, the state-owned carrier, alongside the Danantara sovereign wealth fund that owns Garuda, is under pressure to move quickly with an announcement to please Trump, according to people familiar with the discussions. The airline and Boeing do not yet have an agreement on the models and quantities that would typically be in such an announcement, said the sources, who asked not to be identified discussing private matters.
Boeing referred any questions to Garuda. The airline and its owner did not immediately respond to requests for comment.
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On its own, Garuda does not even have the funds to finance the earlier 737 Max agreement, the sources said. That may prompt Danantara to step in by providing some sort of guarantee or a shareholder loan similar to the US$405 million it put forward last month, the sources said.
Garuda may receive between US$800 million and US$1.2 billion more from Danantara to assist with payments to maintenance and leasing companies, they added.
As a result, any plane deal could be structured as a purchase while the parties discuss financing options with Danantara and lessors for a later stage, the sources said. But given the weighty political implications, Garuda may feel pressure to agree to a deal under terms it does not necessarily favour and with jets it does not actually need, one of the sources said.
Trump is known to combine state visits with tariff announcements to flex his deal-making skills. During his tour of the Middle East, he announced an aircraft accord in every country he visited, including a record plane purchase by Qatar Airways.
Not all of those transactions are necessarily what they appear to be. Trump has previously announced inaccurate sizes for accords, wrong numbers of purchased jets or has mixed up aircraft types. He’s also presented old agreements as new ones. Some deals that were announced during his first term meanwhile, have since fallen through.
At this point, Garuda only operates eight older 777-300 aircraft, raising the question of why the airline would want to buy Boeing’s yet-to-be-certified successor in large quantities, as Trump has suggested. The earlier 737 Max order still sits on Boeing’s books under a special US accounting category for at-risk deals that are not likely to materialise, the sources said.
The state-owned carrier sank back into the red in 2024 after an almost US$10 billion debt restructuring failed to revive its fortunes. That performance is in contrast to its peers in the region that are profitable as they benefit from a rebound in travel demand after the pandemic. BLOOMBERG
