Malaysia Airlines in talks for RM5b MRO deal

Proposed MRO to focus on the 787 Dreamliner, Boeing Max and Boeing NG aircraft


Malaysia Airlines Bhd (MAB) and US-based aircraft maker Boeing Co are currently negotiating a maintenance, repair and overhaul (MRO) deal worth over RM5 billion.

Both parties are in talks for a 12-year contract to service the national flag carrier’s new Boeing MAX and Dreamliner fleet, MAB CEO Peter Bellew said in an internal staff memo dated Sept 15, sighted by The Malaysian Reserve.

The maintenance will be financed via a cost-per-hour deal, paid monthly per aircraft as the operating hours of the aircraft are incurred.

The deal is a part of the memorandum of understanding inked between MAB and Boeing to set up a specialist MRO facility in Sepang, during Prime Minister Datuk Seri Mohd Najib Razak’s working visit to the US last week.

Bellew said the proposed MRO will focus on the 787 Dreamliner, Boeing MAX and Boeing NG (Next Generation) aircraft.

“It will leverage on the existing underutilised hangar facilities in Sepang and require additional highly skilled engineering staff to service local and third-party international MRO contracts,” he said.

In the same memo, Bellew said the search is still ongoing to find approximately six second-hand A330 aircraft that can complement the existing fleet and upgrade the airline’s Asian services quickly.

“Ideally, we want to be able to obtain high quality A330 used aircraft with lie-flat beds and full in-flight entertainment systems to add to the fleet in 2018,” he said.

The A330 suits the business strategy of Malaysia Airlines (MAS), which is to return to being a premium five-star airline.

“The company has been on the lookout for suitable additional wide-body aircraft for the last 12 months to enhance services to India, China, Hong Kong and North Asia,” Bellew said.

He further said that the current A330 fleet is financed via a variety of finance and operating leases, including some export credit debt.

“Payments vary from quarterly to monthly. If additional good value aircraft can be sourced, they will be financed by operating leases,” he said.

MAB currently has 15 passenger and three specialised freight-only A330 aircraft.

These wide-body aircraft, which operate to North Asia, Australia, New Zealand, India, Hong Kong, Saudi Arabia and China, are used on the most profitable routes the airline operates and have lie-flat beds in its business class.

The aircraft will start to end their leases between 2020 through to 2025, thus a replacement will be required.

“The company will continue to evaluate the new Airbus A330neo and Boeing 787-9 Dreamliner to replace this fleet of 15. This is of course, subject to a final decision by the board,” Bellew added.

MAS currently has 54 aircraft in the fleet of 737-800s with 48 in actual operations, as the remaining six aircraft — to be handed back to lessors in December 2017 — are currently going through a lease return maintenance programme.

In 2018, MAB will operate 44 737-800s aircraft daily, with three in maintenance and one available spare.