AirAsia parent Capital A is ramping up its MRO business.
The MRO division of AirAsia’s parent Capital A reported growing business in the second quarter (Q2) amid the steady recovery of commercial aviation in the Asia-Pacific region.
Capital A subsidiary Asia Digital Engineering (ADE) completed 22 base maintenance checks in Q2, up from 12 checks conducted in the same period last year, following the launch of two additional maintenance lines in the southern Malaysian state of Johor, Capital A said in a statement.
Line maintenance services, meanwhile, grew by 179% on an annual basis—98% of which were from narrowbody aircraft, and the remaining 2% from widebody aircraft.
Capital A has been ramping up its spending on MRO, an area it sees as offering strong growth potential. In April, the company secured $100 million from investment firm OCP Asia Ltd to expand its MRO business. The investment will be used to build and operate a new 14-line aircraft maintenance hangar facility in western Malaysia’s Sepang, as well as to support ADE’s further business expansion. The new facility is slated to be completed by the third quarter of 2023.
“This is a very cash-lucrative, very profitable business,” Capital A CEO Tony Fernandes said at a signing ceremony for the deal in April. “To be honest, it was quite an eye-opener for me when I started seeing the kind of margins they [ADE] made.”
Fernandes expects ADE to be a major contributor to Capital A’s bottom line in the future. “I think within four or five years, if the group stays as it is, [ADE] would contribute 30-40% of the profits [for the group],” he said after the investment signing ceremony.
The Malaysian government has high hopes for the country’s MRO sector. Also present at the signing ceremony was Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Abdul Aziz, who, citing an industry report, said that Malaysia’s MRO sector is expected to grow from $1.5 billion in 2020 to $2.5 billion by 2026.
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