AirAsia parent Capital A will establish an MRO business in Cambodia together with the Cambodian hospitality management consultancy Sivilai Asia, according to a Sept. 20 filing with the Malaysia Stock Exchange. 

The Capital A subsidiary Asia Digital Engineering will take a 60% stake in the joint venture while Sivilai Asia will hold the remaining 40% of the MRO business. 

Asia Digital Engineering will inject up to $1.2 million in the joint venture in two tranches, the first during pre-incorporation and the second after incorporation. 

The establishment of this joint Capital A-Sivilai MRO unit follows an agreement reached between the two companies in December 2022 to launch AirAsia Cambodia. Capital A holds a majority 51% stake in that business, while Sivilai has a 49% share. AirAsia Cambodia plans to fly routes within a four-hour radius of the country and will focus on flying to existing AirAsia hubs from Siem Reap, Sihanoukville, and Phnom Penh.

At Capital A’s annual general meeting on June 15, CEO Tony Fernades said that the company is expanding throughout Southeast Asia and that AirAsia Cambodia is expected to begin operations in the fourth quarter of 2023. 

In the Sept. 20 filing, Capital A further explained its rationale for the Cambodian MRO business. “This will create an opportunity for ADE [Asia Digital Engineering] to establish its operation in Cambodia by providing service to AirAsia Cambodia and other third-party airlines operating into Cambodia major airports,” adding that the joint venture will “enable Capital A to capitalize on cost-saving opportunities and potentially capture surpluses from new revenue streams generated.”

MRO is likely to become an increasingly important part of Capital A’s commercial aviation strategy in the coming years. In April, the company received a $100 million investment from the financial firm OCP Asia to grow its aftermarket business. During a press conference to announce the capital injection, Fernandes said that MRO is a “very profitable business” and that within four to five years, “if the group stays as it is,” Asia Digital Engineering will contribute 30% to 40% of Capital A’s profits.