AirAsia outsources MRO services to Destini

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KUALA LUMPUR (July 27): AirAsia Bhd and Destini Bhd has today signed a collaboration agreement under the budget airline's proposed outsourcing of its aviation support services to Destini.

In a statement to the exchange today, Destini (fundamental: 1.7; valuation: 1.1) said the agreement included technical handling, besides maintenance, repair and overhaul (MRO) services.

"Each of these initiatives is to be implemented in a phased manner, over the next six to eight months, one after the other.

"The purpose of the Agreement is to set the track for the two companies to start the final negotiations and implementation plan to execute the strategic outsourcing exercise," Destini said.

Earlier today, AirAsia (fundamental: 0.2; valuation: 1.4) group CEO Tan Sri Tony Fernandes told reporters after the signing ceremony here, that the airline expects the outsourcing to reduce its maintenance cost.

Fernandes said the collaboration was anticipated to cut AirAsia's annual maintenance cost by at least 10%.

“I don’t know how much the contract is worth, but I can say that the potential for Destini is huge. We spend US$100 million (approx. RM381.93 million) on maintenance costs per annum, and anticipate at least 10-15% savings in costs, after collaborating with Destini.

"Working with a 3rd party like Destini, reduces overall cost,” Fernandes said.

At 12:30pm, AirAsia shares rose three sen or 2% to settle at RM1.43, for a market capitalisation of RM3.98 billion.

The ninth most-active stock on the bourse, saw some 17 million shares done.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock isattractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)