Leasing of Helicopters Likely To Go Ahead

Leonardo AW149 helicopter. Leonardo.

SHAH ALAM: IT appears that the leasing of helicopters for the military and other government agencies is likely to go ahead despite the RM16.5 billion plus change cost for 18 years. I am correcting this to 18 years as this was the first figure published on the Hansard (the official transcript). Further down in the Hansard the leasing period is stated as 15 years. Of course, 15 years is the correct leasing period.

Defence Minister DS Khaled Nordin told Parliament about the costs and leasing period during his initial budget round-up on Thursday. He did not say the deal will go through but the fact he confirmed the cost meant that it is likely to be green lighted.

Khaled also told Parliament further details of the leasing deal may need to be expounded in the privileged committee of the Dewan Rakyat and not in the normal, public session or via a written answer (though this will be made public). Even if the minister did not want to give yearly cost breakdown, a check on the calculator showed the annual payment will be around RM919 million, for 18 years or RM1.1 billion if its 15 years or some RM76 million (18 years, RM91 million if its 15 years plus change a month).

This means that we could make the full payment for the 12 CSAR helicopters originally to be procured for some RM2.8 billion within three years. The normal payment schedule – a 10 per cent payment (RM280 million – when the LOA is awarded, another 20 to 30 per cent (RM500 million plus change, this depends on the LOA, the quantum and if needed) within 12 months as progress payment. The final payment is usually paid when delivery is completed ( within 24 to 36 months after the LOA was signed)

Parliament published the Hansard – the official transcript – of the November 7 session on Friday (November 8) afternoon. Even though I managed to download the transcript and read it shortly after, I was unable to publish it until today. I apologise for the delay. It is interesting to note that I had mentioned that the leasing proposal was for utility helicopters, but it had now included RMAF requirements for CSAR helicopters (the Nuri replacement programme). These CSAR helicopters were supposed to be procured outright. He did not name the helicopters though.

Khaled also did not state that the Army will also lease helicopters but since the plan was always to lease them, there was no need for him to say anything about it. Anyhow the leasing proposal was for the Army to lease twelve helicopters, but apparently it was swapped to RMAF. As I had mentioned in another post, it is likely that Army will also have twelve leased helicopters – also AW149s – with the four originally sought in 2022 as its’ requirement is for twelve aircraft. It would be hilarious if they decided to buy the other eight helicopters, of course.

Maka, bagi menjawab persoalan Yang Berhormat Tanah Merah tentang perolehan sewaan helikopter bagi kegunaan pasukan udara Tentera Darat dan penganugerahan kontrak sewaan helikopter Black Hawk kepada syarikat Aerotree Defence and Services Sdn. Bhd., saya ingin kongsikan bahawa proses perolehan ini sebenarnya telah bermula pada tahun 2022. Ia diiklankan pada 15 Julai 2022 hingga 11 Ogos 2022 dan dibentangkan dalam Lembaga Perolehan pada Oktober 2022. Pada masa itu, Yang Berhormat Tanah Merah sendiri merupakan Timbalan Menteri Pertahanan. Jadi, soalan itu boleh dijawab oleh Yang Berhormat sendiri kerana pada ketika itu Yang Berhormat adalah Timbalan Menteri Pertahanan.

Yang Berhormat Pendang pula telah menyentuh mengenai perolehan helikopter melalui kaedah Government Operate, Company Own and Maintain. Ini tadi yang disoalkan oleh Yang Berhormat. Sebagai makluman Yang Berhormat, perolehan secara pajakan aset ini merupakan kali pertama umpamanya dibuat dan dilaksanakan oleh Unit Kerjasama Awam Swasta, Jabatan Perdana Menteri. Perolehan ini melibatkan kontrak bernilai RM16.546 bilion untuk tempoh sewaan selama 18 tahun. Ia melibatkan 28 unit helikopter dan akan memberi manfaat bukan sahaja kepada ATM, tetapi juga agensi-agensi keselamatan negara yang lain. Pecahan pengguna adalah seperti berikut, dua untuk TLDM, 12 untuk TUDM, tujuh untuk Polis Diraja Malaysia, empat untuk Agensi Penguatkuasaan Maritim Malaysia, dua untuk Jabatan Bomba dan Penyelamat Malaysia dan satu untuk kegunaan Jabatan Perdana Menteri.

Tujuan utama adalah untuk memenuhi keperluan agensi pengguna menjalankan operasi udara harian dan misi-misi tertentu selain daripada peperangan. Kerajaan berpandangan bahawa kos tersebut adalah wajar kerana ia merangkumi pembekalan helikopter, perlindungan insurans, perkhidmatan maintenance, repair dan overhaul termasuk dengan alat-alat gantian dan simpanan, kursus dan latihan serta penyelenggaraan luar pangkalan. Melalui kaedah ini, isu utama yang akan diatasi adalah masalah ketersediaan dan kesiagaan pesawat-pesawat helikopter sedia ada. Melalui kontrak pajakan ini, pihak syarikat perlu memastikan tahap ketersediaan dan kesiapsiagaan helikopter yang dibekalkan adalah pada tahap minimum 85 peratus dan agensi-agensi mendapat jaminan jam penerbangan mengikut keperluan masing-masing. Apabila ia melalui konsep pajakan ini, maka ia bermakna pihak end user seperti ATM dan perkhidmatan di dalamnya tak perlu untuk memberi kontrak MRO ataupun membeli spare DR. 7.11.2024 118 part dan sebagainya.

Semua dikendalikan oleh syarikat yang melakukan pajakan ini. Pajakan ini adalah pajakan to own. Maknanya selepas 15 tahun, kerajaan diberi pilihan untuk membeli kesemua 28 unit aset tersebut pada harga nominal RM1 sahaja yang mana selepas 15 tahun, penggunaan setiap aset tersebut dianggarkan bernilai antara RM30 juta hingga RM50 juta seunit. Tetapi, kerajaan ditawarkan hanya membeli RM1 walaupun satu unit itu antara RM30 juta hingga RM50 juta. Datuk Wan Saifulruddin bin Wan Jan [Tasek Gelugor]: Yang Berhormat, sedikit. Adakah pihak kerajaan dibolehkan mendedahkan kos sebenar per month pajakan tersebut dan kos keseluruhan yang akan ditanggung oleh kerajaan sepanjang tempoh pajakan? Adakah boleh didedahkan di dalam Dewan? Dato’ Seri Mohamed Khaled bin Nordin: Semua rundingan itu dibuat oleh UKAS, sama ada ia boleh didedah, kita mungkin sama ada bangkitkan masa jawatankuasa ataupun kita beri jawapan secara bertulis. Puan Yang di-Pertua,

Infographic of the LMS Batch 2 specifications and other details. STM.

Khaled was given 45 minutes for his budget round up speech though he basically did not touched the funding for the ministry. This is because most of the questions posed by parliamentarians were on the leasing of helicopters, Kuwaiti Hornets procurement and issues with the RMN. When it was about the RMN, that Khaled commented on the LMS Batch 2.

Atas sebab itulah, dan begitu juga LCS walaupun design daripada Perancis, tetapi LCS dibuat di Malaysia. Begitu juga apabila kita buat dan tempat tiga literal mission ship daripada Turkiye, kita sepatutnya dalam perancangan kita mempunyai 18. Mungkin 15 itu kita akan buat di Malaysia.

*Updated the leasing period to 18 years and 15 years as reflected in the Hansard. This could be a mistake by transcript officer or the minister misspoke.

–Malaysian Defence

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About Marhalim Abas 2314 Articles
Shah Alam

26 Comments

  1. RM16.5 billion for a little more than 2 dozen helicopters is just crazy when BOMBA bought each for just RM105 million
    https://www.malaysiandefence.com/aw189-contract-details-finalised
    And maintenance of 12 EC725 for 5 years costs RM378million
    https://www.malaysiandefence.com/bhicas-to-continue-maintenance-of-ec725s/

    Extrapolating those numbers for 28 helicopters and 15 years of maintenance does not even reach 1/3 of the supposed lease cost.

    Then there is also the Poland outright buy of 32 AW149 with all things included till end of their service lives for just RM8.03billion
    https://www.malaysiandefence.com/new-aircraft-and-helos-for-police-air-wing/#comment-930463

    As for helicopters for PUTD, the used blackhawks are the ideal option. Just that leasing path of acquisition is not. Now the blackhawk lease has failed, how can we be sure this time with billions of ringgit on the line it will not fail like the blackhawk leasing?

    Rather than leasing, we could get them direct from US EDA, buy from other users (like south korean UH-60P which is being replaced by surion even if it had more than 50% of its life remaining) or direct commercial sale like what portugal did, at a cost around RM10 million less per helicopter compared to PUTD lease while also including training and 5 year service and support
    https://www.malaysiandefence.com/portuguese-af-fire-fighting-black-hawks

  2. Enough. No more made in Malaysia warships n boats unless the builder has a proven track record

  3. “Semua dikendalikan oleh syarikat yang melakukan pajakan ini. Pajakan ini adalah pajakan to own.”

    What i don’t understand is, which company will provide the leasing?. Leonardo itself or local companies?

  4. … – “Rather than leasing”

    So what can be done about it; apart from hoping the decision makers read your posts and reach an epiphany [as likely as Trumo visiting Tehran next month]; resulting in a major policy shift? You reach out to the aide of a MP so the issue can be raised in parliament? Write to the Defence and Finance Ministers? A national referendum perhaps?

    Lee – “boats unless the builder has a proven track record”

    Things can still go ratshit even if the yard has a “proven track record”. The LCS programme when turd like not only because BNS was not put through a learning curve but also because of political interference: no effective political oversight and a lack of corrective mechanisms.

  5. It is a local company, it’s an open secret. However, as I am a lowly paid freelance journalist, I am not going to publish it here or even in the comments section. Let people driving Panameras or Urus or anonymous make it public. Unless of course, an official statement is made naming the company.

    Of course, it is not Leonardo, it is not a local company. Even its local subsidiary cannot bid on tenders and notices.

  6. I don’t drive around in Lamborghini Urus either but something fishy is still fishy. And we need to voice out our disagreement on this matter.

    I don’t mind local something, but it needs to add value to the deal, with logical level of difference compared to doing 100% outright buy from overseas.

    Example even the Polish AW149 includes massive amounts of value added processes in Poland, including local production, local R&D to fit weapons systems to the helicopter, local training infrastructures, local sustainment efforts that spans way more than 15 years. But how come it comes in at leas than 50% the 15 year lease cost for malaysia??

    Why is this explicitly wasteful deal is acceptable for a government that says it is pushing for transparent policies?

  7. Very funny the government. Enriching local companies while wasting rakyat moneys. Oops sorry if I am wrong. We have a problem of not enough money to maintain current assets, and yet we pay even more than needed to get new lease assets (which include maintainance) instead of buying new (which is cheaper in the long run), what stupidity…..

    As for local company that won this contract…….previously Weststar Aviation Services Sdn Bhd won the 4x AW139 lease for RMAF in…well go figure then guys…

  8. … – “something fishy is still fishy”

    Adds to the already very long list of things which are “fishy”, intended not to benefit the taxpayer it end user but national interests. Nothing new. This goes goes in hand with the local production; self sufficiency myth/delusion which results in a MAF whose capabilities don’t reflect what’s been spent on it

    … – “And we need to voice out our disagreement on this matter”

    Ok. Apart from hoping the decision makers make a policy change from reading the posts here [as likely as Putin being welcomed in Washington] what is the next course of action?

    You reach out to the aide of a MP so the issue can be raised in parliament? Write to the Defence and Finance Ministers? A national referendum perhaps?

    Luqman – “Enriching local companies while wasting rakyat moneys”

    I’m surprised that you’re surprised. Placing priority in the local defence industry has been the norm since the 1990’s. Defence and the patronage system are intertwined.

  9. And after the leasing term ended there will be an option to purchase with RM1 per unit. This is find funny, after paying double the cost. Maintenance cost for sure got marked up as it will be conducted by a local contractor or contractor appointed by Leonardo

  10. @ qamarul

    “Maintenance cost for sure got marked up”

    Even with the Boustead “sure got marked up” maintenance contract cost, and assuming buy new helicopter have zero maintenance included, it will still come out at around RM5 billion if you extrapolate the numbers (which are real world already executed malaysian government contracts) that is as per marhalim previous reports here in malaysian defence to cater for 28 helicopters.

    So RM16.5-16.8 billion is more than 3x markup of the numbers already “sure got marked up” !!!

    I don’t know what kind of bean counters that accept the RM16 billion numbers as a fair value for the service.

  11. The people responsible for this program is the UKAS, unit kerjasama awam-swasta Jabatan Perdana Menteri. Who are these people government servants? Looks shady & many grey area for these lease contracts. The benefit mentioned by the minister that the government dont have to pay for maintenance & insurance premiums. But to me with that exorbitant amount we did pay for it lol.

  12. What is with this country and our fascination with building things locally? I can still support the idea if the RMN was not in such a terrible state now, we need ships ASAP and all they can think about is building local…may the divine hand that has watched over Malaysia continue to do so these coming decades, with a certain POTUS back in the White House, it’s unlikely anyone will stop Big Brother from unleashing havoc in the Pacific.

  13. “So what can be done about it”
    Break it to political influencers to investigate like RPK… oh wait. I mean Rafiz… oh wait. Err who still purported fight for justice but not on PH payroll?

    @Qamarul
    “Who are these people government servants?”
    Those picked by PMX? So whatever they do obviously he knows/decides.

    “there will be an option to purchase with RM1 per unit”
    I doubt it will be that cheap, defo will be at book value prices. So the enduser will lose anyways.

    @Luqman
    “what stupidity…..”
    It isnt if the intention wasnt to boost our defence but ultimately is to enrich newly aligned cronies.

    @Jason
    “What is with this country and our fascination with building things locally?”
    Building things locally but more expensive can still have a sliver of justification, but to spend double on just leasing with no real building capacity other than building crony empires is something that PR/PH used to condemn and was their key to becoming the Govt of today. But now with the oversights in their pockets, who will condemn them then?

    Its no surprise that this and recent 5G debacle, and many more are so blatantly decided after when PMX has now secured his position. If this was during BN era…

  14. “I don’t know what kind of bean counters that accept the RM16 billion numbers as a fair value for the service.”

    They are under no illusions that it is “fair value” like how they are/were under no illusions that a lift of other things we did we “fair value”. It’s politically expedient. Something that can be approve.

    Jason – “What is with this country and our fascination with building things locally”

    The theory of that it improves the local industry; ensures cash is spent kindly; generates jobs and improves on self sufficiency. In top of that it makes the politicians look good and gives us bragging rights. So goes the theory which like many things looks and sounds good on paper.

  15. Joe-Those picked by PMX? So whatever they do obviously he knows/decides.

    Im not sure if the pm knows about this but i do know whoever is behind this got that oldtimer mindset calculation. Double or nothing! Only this is worst dirtbag edition.

  16. Jason – ” it’s unlikely anyone will stop Big Brother from unleashing havoc in the Pacific”

    “Big Brother” as the hegemonic power since 1945 has maintained stability in the region and its actions are also a result of China’s actions; some of which are worrying.

  17. @Qamarul
    “Im not sure if the pm knows about this”
    If Najib is guilty for his downline indiscretions in 1MDB surely PMX should shoulder the same responsibility for his staff actions even if he can claim he knows nothing, rite?

  18. @Azlan

    I’m afraid my comment was too ambiguous as to who the Big Brother I’m actually referring to and I apologise for that, it’s not Uncle Sam, it’s the other one actually…and since a certain returning POTUS is well known in his past administration for promoting an isolationist America instead of a global policeman, who is going to keep that other one in check if it starts to run amok? Which according to some top US generals, could happen within this decade.

  19. Qamarul – “Im not sure if the pm knows about this”

    You seriously, honestly think that various entities including the PMO would come up with such an arrangement and have the Defence Minister announce it without the PM knowing about it?

    Qamarul – “i do know whoever is behind this got that oldtimer mindset calculation”

    Understand that it never was about saving money or about a long term cost effective solution to benefit the end users and taxpayer.

    Jason – ” it’s the other one actually…and since a certain returning POTUS is well known in his past administration for promoting an isolationist America instead of a global policeman”

    Ultimately despite all the rhetoric and nonsense said by the man; Trump is a businessman; he wants trade not war and America will still be the dominant player for quite a long time to come.
    The USD; not any other currency will continue to be the dominant currency and the West; not BRICSs will continue to dominate the global economy. Major corporations will continue to have their HQs in London and other Western cities: not in Beijing or Sao Palo. China and others will offer sharp competition but the West will still monopolise major technologies.

    Jason – ” Which according to some top US generals, could happen within this decade”

    They would say that wouldn’t they; need to justify spending. As for China it wants trade and not war. It too has a whole lot to lose in the event of war. Imagine the political repercussions if an invasion of Taiwan fails and the PLA [an instrument of the party not the people or the country] suffers heavy losses – the survival of the Chinese Communist Party would be at stake.

    I’m not saying however that war isn’t a possibility and that China would not go to war of faced with no choice but then again; long before most people heard about the Spratlys; I remember articles in the 1990’s about how the Spratlys was a “flashpoint” …

  20. Err for me this is just a scheme to keep enriching the cronies (maybe sponsors)..15+ billion for 18 year lease seems acceptable but no..if you buy outright will not exceed 7 billion.isnt it better if atm brances service their own equipment?..so let me get this straight this whole lease huha is political decision and not what atm want? So they are forced to accept them

  21. @Firdaus
    “not what atm want?”
    Nope. They wanted utility (PUTD) and CSAR (TUDM) choppers which if they specced in from the start, they will get what they wanted. Its just they wont be owning that asset but also they wont need to have headache on maintenance. The vendor will do that.

  22. Well i forgot another real world malaysian example and costing…

    Leasing of 4x AW139 for TUDM from WESTSTAR Aviation Services

    Cost of lease – RM265 million for 4/5 years (just assume it is for 4 years)

    https://www.malaysiandefence.com/how-much-is-that-helicopter-in-the-window/

    So 1 helicopter per year is RM16.6 million. 28 helicopters times 15 years would be

    16.6x28x15 = RM6.972 billion

    still less than 50% of the proposed AW149 lease of RM16.5 billion

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