Indonesia threatens to halt Airbus jet orders over palm oil feud

Indonesia is pushing its domestic airlines to halt purchase of Airbus SE planes in retaliation for curbs imposed by the European Union on use of palm biodiesel.

Indonesia’s Trade Minister Enggartiasto Lukita is also asking carriers including PT Lion Mentari Airlines to consider switching their outstanding aircraft to Boeing Co. Lukita has spoken to Lion’s co-founder Rusdi Kirana about dumping Airbus and the country’s largest low-cost carrier supports the government move, the minister said in a text message on Thursday.

“We are exploring all options,” Lukita said, when asked if the government would order all carriers to switch to Boeing from Airbus. “I have contacted Rusdi, and he said the airline will follow whatever the government decides.”

Siva Govindasamy, a Singapore-based spokesman for Airbus, didn’t immediately respond to request for comments.

The Indonesian threat to turn its back on Airbus is the fallout of European Union’s decision earlier this year to place stricter limits on palm oil’s use in biofuels on concerns over deforestation. Indonesia, the world’s largest producer of the tropical vegetable oil, last week also threatened to slap retaliatory tariffs on import of dairy products from EU after the bloc imposed anti-subsidy duties on its palm oil biodiesel.

The escalation of trade feud may complicate Lion’s plan to turn to the European manufacturer following a dispute with Boeing after the crash of its 737 Max 8 jet last year, which killed 189 people. Flag carrier PT Garuda Indonesia has also said that it may cancel its Boeing Max orders for other models.

Lion Air placed an order for eight Airbus A330neo planes worth $2.4 billion at list prices last year, adding to a 2013 order for 234 planes worth $24 billion.