Summary:

• Asia Digital Engineering (ADE) gained important new capabilities when it was approved for heavy maintenance in 2021.
• The subsidiary is handling 40% of the AirAsia Group’s heavy maintenance, and aims to cover all of it.
• ADE’s goal is to have 30% of its MRO revenue coming from third-party customers.
• A new 14-line hangar is due to open in Kuala Lumpur next year, boosting capacity significantly.
• Gaining EASA approval is a priority for ADE, and the process is under way.

MRO subsidiary is gradually taking over more of AirAsia’s base maintenance requirements

ADE was established in Sep-2020, using AirAsia’s engineering division as its foundation.

Before then the engineering operation focused on line maintenance, but ADE gained its heavy (or base) maintenance certification from Malaysian regulators in May-2021.

This will allow a big step in the evolution of ADE’s capabilities as it takes over an increasing share of the group’s heavy maintenance needs. This will keep more revenue within the group.

ADE is now handling about 40% of the AirAsia Group’s heavy maintenance, said Adnan Mansur, ADE’s head of digital and innovation services. The intention is eventually to take over all of the group’s base maintenance requirements as well as pursuing third-party work, Mr Mansur said on the sidelines of Aviation Week’s MRO Australasia conference in Brisbane, Australia in May-2023.

The subsidiary is handling 6-7 aircraft per month for heavy maintenance visits up to C-checks, Mr Mansur said. For now at least, AirAsia is still contracting out the remainder of its heavy maintenance needs to other providers.

Much of its work is focused on restoring parked AirAsia aircraft to service as the group continues to spool up its fleet.

The chart below shows that the AirAsia Group has been steadily returning more aircraft to service. From Jul-2022 it has had more in-service than inactive.

The group – including the Malaysian, Thai and Indonesian operations – currently has 136 narrowbodies in service and 47 inactive.

Expanding third-party business is a key part of the ADE strategy

When ADE was established, one of the main goals was to create a new revenue stream for the group by attracting third-party maintenance, said Mr Mansur. The company aims to have third-party work deliver 30% of its revenue within five years.

This will also help ADE in the longer term, as it will not have to rely solely on AirAsia for base maintenance work, noted Mr Mansur.

ADE has approvals for line maintenance from multiple jurisdictions, predominantly in Southeast Asia. It also has approvals for heavy maintenance on the Airbus A320ceo and A320neo families of aircraft. The company is working on gaining heavy maintenance approval for Airbus A330s, which are operated by Capital A’s group member AirAsia X.

One of ADE’s priorities is gaining approvals from EASA, initially for line maintenance. This process is under way, and EASA representatives have visited ADE’s facilities. EASA certification could potentially occur as early as the third quarter of 2023, Mr Mansur said.

Another important facet of ADE’s business plan is to develop digital capabilities that it can first use in its own operations and then market to other companies.

An example of this is two new digital products launched by ADE on 24-May-2023. One, called Aerotrade, is a platform that provides a marketplace for procuring aircraft parts. The other, known as Elevade Fleet, is a holistic aircraft health management system.

Constructing one of the region’s largest hangars will give ADE space it needs to expand operations

ADE is increasing its facilities footprint to accommodate its growing capabilities and longer-term aims.

The company is building a new hangar at Kuala Lumpur International Airport (KLIA) to increase its base maintenance capacity. The hangar, which will be able to accommodate 14 narrowbodies at once, is due to be operational in the third quarter of 2024.

In the meantime, ADE has a smaller hangar at KLIA and is leasing hangar space at airports in Subang and Johor Bahru, Malaysia.

These facilities combined give it seven aircraft maintenance lines. The company has not yet decided if it will retain all of the leased facilities once its 14-line hangar opens, said Mr Mansur.

In addition to more hangar space, ADE is also upskilling and boosting its workforce to support its base maintenance plans.

Heavy maintenance demand is robust now, and will keep growing along with Asia-Pacific fleets

Expanding the MRO subsidiary is a good move for the Capital A group. MRO services are in high demand at the moment, and there is not enough capacity to meet airline industry needs in the Asia-Pacific region.

This means third-party demand in Southeast Asia – particularly for Airbus narrowbodies – is likely to stay strong for the foreseeable future.

Expanding into base maintenance is also a sound move for Asia Digital Engineering – not only does it add to third-party business opportunities, it also gives the group more control over its own heavy maintenance provision.

The experience of the COVID-19 pandemic and post-pandemic periods demonstrated the advantages of having in-house heavy maintenance capabilities, or at least within the same group. This may give Capital A more reason to retain at least a strategic stake in ADE should it decide to sell a larger share of the subsidiary.