Norwegian Air Cancels Order With Boeing and Sues for Losses

Boeing trades lower after Norwegian Air says it is cancelling its order for nearly 100 Boeing planes, and that it is suing Boeing over 737 MAX-related losses.

Shares of Boeing  (BA) - Get Report traded lower on Tuesday after receiving word from Norwegian Air Shuttle that it will not be moving forward with buying nearly 100 remaining Boeing-built planes, and that it was suing Boeing over losses from the grounding of the 737 MAX.

It also said it was suing Boeing over issues with engine performance of its Boeing-built 787 Dreamliners.

Oslo-based Norwegian Air announced it has canceled orders for 97 Boeing aircraft and will claim compensation from the U.S. airplane maker for the groundings of the 737 MAX and also for 787 engine troubles that it said dented profits even before the coronavirus pandemic pushed the global airline industry into a tailspin.

The cancellation includes 92 737 MAX, five 787 Dreamliners and what are called eGoldCare service agreements that extend to both types of planes. Norwegian Air did not specify the amount of compensation it was seeking from Boeing.

“Norwegian has in addition filed a legal claim seeking the return of pre-delivery payments related to the aircraft and compensation for the company’s losses related to the grounding of the 737-MAX and engine issues on the 787,” the carrier said.

The ongoing global grounding of Boeing’s 737 MAX “… has also disrupted NAS’ operations and caused significant losses,” it said.

Norwegian also noted that the company’s 787 Dreamliners, powered by Rolls-Royce Trent 1000-powered engines “… have suffered from long-running reliability issues that have affected reliability and resulted in premature and unplanned maintenance, which has disrupted the company’s operations and caused further significant losses.”

“Norwegian has engaged in a commercial dialogue with Boeing with a view to resolving its 787 and 737 MAX issues and obtaining compensation for its losses. The dialogue has [yet to date] not led to an agreement with a reasonable compensation to the company.”

The order cancellation and lawsuit follows by a day news that Boeing was set to begin certification testing with federal aviation officials on the grounded 737 MAX this week.

The Federal Aviation Administration will conduct a "wide array of flight maneuvers and emergency procedures" on the grounded 737 MAX that will "enable the agency to assess whether the changes meet FAA certification standards."

Shares of Boeing ended down 5.75% at $183.30 in trading on Tuesday.