Hard times continue for the aircraft manufacturer, and there doesnt seem to be any way out
April 23, 2020
Boeing has been out of the news recently as it tried to mend all the setbacks with its 737 MAX aircraft. On Tuesday, however, the company found its way back into the news cycle after being hit with a $336 million lawsuit.
The company behind the dispute is ALAFCO, a Kuwaiti leasing company. ALAFCO claims that Boeing rebuffed its request to return advance payments for an order it placed -- then canceled -- for 40 of Boeings beleaguered MAX jets.
ALAFCO stands for Aviation Lease and Finance Company, with the majority of its customers in the Middle East and Asia. Its only U.S. lessor is economy carrier Sun Country Airlines.
The argument
ALAFCO simply wants its money -- $336,439,850 in advance payments -- back from Boeing. The leasing agency is taking the position that Boeings failure to deliver, coupled with the circumstances surrounding the grounding of the Max aircraft, substantially impair the value of the purchase agreement as a whole.
ALAFCO appears to have a legal leg to stand on. It claims that canceling the order is justified under a section of the Uniform Commercial Code that protects buyers when deals go wrong because of delivery issues.
Hard times continue for Boeing, but its not giving up
Boeing is in a difficult situation. The Federal Aviation Administration continues to be frustrated with the companys efforts to remedy the 737 MAX's software issues, and it recently asked lenders for $10 billion to help offset the losses stemming from its 737 Max incidents.
This isnt the first time an aircraft lessor has filed a suit against Boeing for failing to make good on delivery of a 737 MAX order. In December 2019, Timaero Ireland Ltd, an Ireland-based plane lessor, sued Boeing for $285 million over its failure to fulfill its part of an order for 22 of the 737 MAX aircraft.
Despite all of this, Boeing still has its game face on. In a recent letter to its employees, company CEO Dave Calhoun affirmed that the company continue(s) to make good progress on returning the 737 MAX safely to service.