[KUALA LUMPUR] Asia Digital Engineering (ADE), the wholly-owned engineering and maintenance subsidiary of Capital A, has secured a US$100 million investment from Hong Kong-based investment management firm OCP Asia.

At an event in Kuala Lumpur on Wednesday (Apr 26), Capital A chief executive Tony Fernandes said the maintenance, repair and overhaul (MRO) market is a lucrative business. He expects the segment to contribute up to 40 per cent of the group’s profit in five years’ time, after its new MRO centre starts operations in 2024.

Formerly known as AirAsia Group, Capital A is looking to expand its MRO business, which currently contributes about 3 per cent to its overall revenue.

The 14-line MRO centre in Selangor has the potential to expand to 20 lines within the next three years, said Fernandes.

A portion of the new investment will be used to fund the construction of this 8.5 ha aircraft maintenance hangar facility, with the first phase slated for completion by the second quarter of 2024. Services offered include line maintenance, warehouse and engineering support services for commercial aircraft.

ADE chief executive Mahesh Kumar said the new MRO centre, when ready, will create numerous “high-value jobs” for Malaysia’s aviation industry. For a start, there are plans to recruit at least 1,000 engineers to work at the centre, he said.

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Currently, ADE leases and operates two MRO facilities in Subang and Johor, operating six lines of MRO facilities in total.

Fernandes described the US$100 million investment by OCP Asia as one that “vindicates” Capital A’s strategy of diversifying into more than just an airline.

“We have now set up a group of companies offering other airline services such as digital and logistics to cater to robust market demand as Covid ended,” he said.

Also speaking at the event was OCP Asia’s founding partner Teall Edds, who noted that the MRO sector will be a critical element within the aviation value chain, following the rebound of global air travel.

He is upbeat about ADE’s vision to become one of the largest aircraft MRO service providers in the region, backed by the Malaysian government’s efforts to develop the country into a regional aviation hub.

Malaysia’s MRO sector is estimated to grow from US$1.5 billion in 2020 to US$2.5 billion in 2026, said Minister of Investment, Trade and Industry Tengku Zafrul Aziz in a speech.

“In 2022, Malaysia secured RM600 million (S$179.7 million) worth of MRO expansion projects involving heavy maintenance and components MRO activities, by various reputable companies operating in Malaysia. This indicates that investors saw good investment opportunities in the MRO sector,” he said.

Commenting on the country’s economic outlook, Tengku Zafrul said that while Malaysia is not spared from global headwinds such as rising interest rates and supply-chain disruptions, the government is looking to secure and diversify the supply chain to future-proof the economy.