Virgin Australia has deferred delivery of the first jets in an order of 48 Boeing 737 MAX aircraft amid ongoing uncertainty around the scandal-plagued plane and as the airline tries to improve its own financial position.
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In the first major decision by new chief executive Paul Scurrah since he took the top job a month ago, the airline said it was pushing back on delivery of its first MAX aircraft from November this year to July 2021.
Boeing's new series of aircraft have been grounded globally since March following two fatal crashes involving MAX 8 planes in the past six months, in Indonesia and Ethiopia, which killed 346 people.
The price tag on Virgin's order is confidential but is estimated to run at close to $2.5 billion, and pushing back the order will delay a $1 billion delivery bill.
Virgin had stood by the multibillion-dollar MAX order under its previous CEO John Borghetti, despite it struggling to reach profitability, maintaining that the MAX's lower running costs and better fuel efficiency would help the airline compete better with Qantas.
Mr Scurrah said he and the Virgin board were on the "same page" about changing the order, which would have been necessary even without the safety crises engulfing Boeing.
"Coming in and getting a better commercial outcome for the group on the MAX order... was one of my biggest single priorities here, which is why we jumped on it quickly," Mr Scurrah said.
He said Virgin's existing fleet of workhorse 737s was still relatively young and the airline could get more out of them before incurring the cost of bringing in new aircraft.
Tony Webber, an aviation consultant at Airline Intelligence and Research, said it was a sensible move given both Virgin and Qantas were benefiting from keeping their domestic capacity stable and pushing up airfares.
"All the benefits you get from using a new aircraft will not dominate the benefits of keeping capacity stable," he said.
Delaying deliveries normally incurs financial penalties, but Virgin said it could not reveal any financial details of its agreement with Boeing.
Virgin has also converted the first 15 jets in its order from 737 MAX 8 aircraft to the larger MAX 10 model, which is still under development.
That means the airline won't receive any MAX 8s - the model involved in the two fatal crashes - until 2025, and will leave it with a total of 25 MAX 10s and 23 MAX 8s.
Mr Scurrah said he was confident in Boeing's commitment to return the MAX safely to service.
"You will see it return to service long before you see them in Australia, and I think that's a good outcome for everyone," he said.
Along with the potential to invest in other areas of the business or strengthen its balance sheet, Mr Scurrah said he hoped deferring the order would lead to an upgrade to Virgin's "B" credit rating.
Virgin considered trying to cancel the order outright, but that would have come with hefty fees, and Mr Scurrah said Virgin would still need to renew its fleet eventually.
Preliminary investigations into the two fatal MAX 8 crashes, involving Indonesia's Lion Air and Air Ethiopia, have pointed to a new flight software installed on the jets designed to prevent a mid-flight stall by pitching the nose downwards.
Investigators believe the "MCAS" system on both flights was triggered erroneously, sending the planes into uncontrollable nosedives.
Boeing says it has created a fix for that problem, and US media has reported the planes could be cleared to fly again by early June.
