AirAsia Group has created a new MRO company, Asia Digital Engineering, a wholly-owned subsidiary that will provide engineering services for the group's airlines as well as for other airlines in the region.

The new entity will broaden the company's existing expertise in aircraft engineering, group chief executive Tony Fernandes said in a statement on September 9. It will provide “numerous efficiencies,” he added, and draw on the group’s experience in maintaining a fleet of over 250 A320 Family and A330 aircraft.

“All AirAsia engineers and MRO assets will be consolidated to provide a centralised technical support service for our fleet of aircraft, and potentially for other commercial airlines in the near future also,” he elaborated.

Based at the group’s headquarters at Kuala Lumpur International, the subsidiary will provide line maintenance, engineering support, component and warehouse services, and digital and innovation services for the fleet of aircraft in the group, which consists of AirAsia and AirAsia X in Malaysia together with subsidiaries in India, Indonesia, Japan, the Philippines, and Thailand.

Targeting a 10% reduction in maintenance costs, Asia Digital Engineering will be “leveraging the latest technologies in automation, big data analytics, predictive maintenance, machine learning, and artificial intelligence to effectively increase productivity and efficiency,” the statement said.

The creation of a regional MRO provider “bodes well with” Malaysia’s national transport policy, transport minister Wee Ka Siong said, and it has “just received” Aircraft Maintenance Organisation (AMO) approval from the country's civil aviation authority.

Setting up a new, centralised, and independent MRO unit may add MYR1 billion ringgit (USD240 million) to AirAsia Group's earnings, according to Malaysian Industrial Development Finance (MIDF) Research analysis released on September 11.

The estimate is based on previous aircraft maintenance, repair, and overhaul costs. AirAsia Group spent MYR1.32 billion (USD318 million) and MYR938.37 million (USD226 million) on MRO in 2019 and 2018, respectively, accounting for about 13% of its total operating expenses.

“However, we believe the challenging operating environment in the short term will have more bearing on [the new unit's] earnings,” MIDF Research qualified.