Category Archives: Indonesia

(BBG) Boeing Max Design Faulted in Lion Air Crash, Indonesia Says


  •  Reliance on one sensor made flight-control system vulnerable
  •  Investigators presented final findings to relatives of victims
Investigators examine engine parts from Lion Air flight JT 610, Nov. 2018.
Investigators examine engine parts from Lion Air flight JT 610, Nov. 2018. Photographer: Bay Ismoyo/AFP via Getty Images

Design flaws in Boeing Co.’s 737 Max and a lack of information for pilots on how to deal with malfunctions contributed to last year’s crash of Lion Air Flight 610, which killed 189 people, Indonesian investigators found.

In a nine-point presentation to victims’ families, the National Transportation Safety Committee criticized certification procedures for the jet, saying that a flight-control mechanism was approved based on incorrect assumptions. The so-called Maneuvering Characteristics Augmentation System was also implicated in the crash of an Ethiopian Airlines 737 Max in March that claimed 157 lives.You’ve reached your free article limit.Try 3 months for $105 $6. Cancel

(ZH) In Major Blow To Boeing, Indonesian Airline Cancels $6 Billion 737 Max Order


Indonesia’s national carrier became the first Boeing customer to announce it was cancelling a multibillion-dollar aircraft order, inflicting a major commercial blow after the model was involved in two fatal crashes in five months. Airline Garuda Indonesia said on Friday that it is requesting the cancellation of 49 Boeing 737 Max 8 jets valued at $6 billion, according to Reuters

Garuda – which has just one 737 Max in its fleet, is the first airline to publicly confirm plans to cancel an order following the Ethiopian Airlines crash that killed 157 people – just five months after another Max 8 operated by Lion Air crashed off the coast of Indonesia, killing 189. The world’s entire fleet of 737 Max 8s was grounded following the latest incident. 

Garuda’s CFO says they may change their order to widebody Boeing models. Spokesman Ikhsan Rosan told CNBC that the airline sent a letter to Boeing on March 14 to cancel its current order. The company has yet to hear back from Boeing, however the aircraft manufacturer will visit Jakarta on March 28 for “further discussion.” 

As we noted earlier, according to JPM economist Michael Feroli, unless resolved quickly Boeing’s problems will soon make a dent in the economy. As JPM calculated, if 737 MAX production is halted for an extended period of time, it would take about 0.15% off the level of GDP, or about 0.6%-point off the quarterly annualized growth rate of GDP in the quarter in which production is stopped.

Based on similarities between the two Max 8 crashes, investigators suspect a malfunctioning stall sensor system may have forced both planes into nosedives. The day before the Lion Air crash last October, an off-duty pilot flying in the cockpit saved the same plane from a nosedive by explaining to frantic pilots how to disable the anti-stall system. 

The US Department of Transportation has requested an audit of the FAA’s approval process for the Max8 jets, while the FBI is reportedly participating in a criminal investigation of the certification process. 

+ (BBG) Contagion Worry Spurs Indonesia to Strengthen Market Buffers

(BBG) Contagion Worry Spurs Indonesia to Strengthen Market Buffers
By Yudith Ho

Indonesia knows more than most Asian nations what global market ructions can do, having borne the brunt of the Asian financial crisis and the 2013 taper tantrum. The world’s fourth most-populous nation is now strengthening its defenses as contagion risk looms from Greece to China.

President Joko Widodo’s administration has asked China to buy Indonesian sovereign bonds, the Finance Ministry said in Jakarta on Thursday. That follows a decision in late June to give the Financial Services Authority the power to buy local and foreign-currency government debt, as policy makers seek to contain spikes in borrowing costs during market volatility.

The pressure is on for Indonesia to insulate itself against the risk of capital flight from emerging markets, as China’s stock rout wipes out more than $3 trillion in less than a month, Greece edges closer to leaving the euro and the U.S. prepares to raise interest rates. At stake is the government’s ability to sell bonds and fund a spending program crucial for reviving Southeast Asia’s biggest economy.

“We’ll see volatility in all markets, it’s unavoidable, so the most important thing is to strengthen the financial market,” said Leo Rinaldy, an economist at PT Mandiri Sekuritas in Jakarta. “In the medium and longer term, what Indonesia needs to do is to strengthen its economic fundamentals. Good fiscal spending, infrastructure execution and policy clarity are necessary.”

Rupiah Weakness

China is interested in buying Indonesian sovereign rupiah bonds, Loto Srinaita Ginting, director of government debt securities at the Finance Ministry, said on Thursday.

The rupiah has lost about 7 percent this year, the most among Asian emerging-market currencies after the Malaysian ringgit. It traded at 13,338 a dollar as of 2:42 p.m. in Jakarta, prices from local banks show, near a 17-year low of 13,390 reached on June 9. Foreign-exchange reserves fell for a fourth month in June, an indication the central bank has been propping up the rupiah.

The last time the Indonesian rupiah was this weak in 1998, governments across Asia were seeking international bailouts to pay off foreign creditors. Indonesia fell into arecession, inflation soared and long-time dictator Suharto was ousted from power amid public protests.

“The situation in China is more worrying” than the Greek crisis, Vice President Jusuf Kalla said in an interview with Bloomberg Television Indonesia on Wednesday.

Yields Rise

In 2013, the anticipated reduction of unprecedented U.S. monetary stimulus caused the rupiah to weaken 21 percent against the dollar, the most since 2000. With a persistent current-account deficit and foreign ownership of local-currency government bonds at almost 40 percent, Indonesia remains vulnerable when investors choose to pull out of riskier assets.

The yield on the country’s 10-year local-currency notes has risen 98 basis points since March to 8.42 percent and reached a 16-month high of 8.76 percent in early June, Inter Dealer Market Association prices show.

The Finance Ministry enacted a regulation on June 24 that allows the OJK to buy rupiah and foreign-currency notes directly from the ministry via private placement. The decision will diversify the investor base for the debt, Robert Pakpahan, director general at the budget financing and risk management office at the ministry, said on Thursday.

The financial services authority, known as the OJK in Indonesia, oversees the capital markets and financial institutions. The agency will use excess funds from fees it collects from banks for the bond purchases, Pakpahan said Thursday. The minimum private placement amount for domestic notes has been tripled to 300 billion rupiah ($23 million), he said.

Diversifying Base

Indonesia is also ready to sell euro notes when the Greek crisis calms down, said Scenaider Siahaan, strategy and portfolio director at the ministry.

“We have diversified our investor base across several currencies and investor types and we have a financial stability framework in place,” the ministry’s Pakpahan said. “So the hope is that more foreign investment in our bonds becomes good news rather than a concern.”