SHAH ALAM: How much is that helicopter in the window. It depends actually but according to Wikipedia, the price of a single Leonardo AW139 twin engine helicopter, is around US$12 million (RM50 million). The actual sticker price will be according to the specifications of the buyer, of course.
Anyhow, the cost of the “Day and night multipurpose helicopter rental services for the RMAF” by Weststar Aviation as announced at DSA 2022 is RM265 million (it was not announced publicly but the figure was listed in the greeting book for VIPs at the ceremony).
However ,it does not list out the duration of the contract though if you divide it into four years, the annual rental cost for the four AW139 will be RM66 million (or RM16 million per air frame annually). RMAF, however, will be responsible for the fuel and personnel costs.
RMAF had previously stated the cost of maintenance for the Nuri fleet (for at least 12 aircraft) was about RM70 million annually. It stated that despite this, the number of airframes available were low. This resulted in RMAF deciding that it does not make economic sense to continue operating the Nuri and its decision to lease the replacements instead while waiting for replacements by 2026.
So what do you think of the leased deal?. Is it a fair deal? It must be noted much of the cost of the rental service is the insurance premium, according to an industry source. The premium is higher as the end user is a military organisation instead of a civil one.
— Malaysian Defence
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View Comments (34)
Of course it is not
Because of red tape and bureaucracy, the government rewards waste of money, because it is easier to approve operational expenses, rather than development budget.
If it is bought outright (even of it is the same commercial spec as the leased helicopters), exponentially it would be much cheaper (even direct comparison is cheaper actually), as the lease is just for four years, but buying outright you could use it forever (or in case of nuri, more than 50 years).
The AF could buy the 1st 4 unit. But there's no guarantee the next menhen going to approve the same model for the next 20 unit. Which would lead to a continuation of rojak air force that increase the operational cost.
An easy way to make politicians commit to a multi decade weapon acquisitions is to set up a local military industrial complex. At that point the politicians would face prospects of voters job loses if they cancelled anything. But that would create a different kind of problem instead.
Leasing military equipment, much like leasing cars or leasing machinery, makes sense up to a certain time period, whereby past it the cost escalates and ROI quickly drops. Marhalim, in your write up, you did not state these GOCOM choppers cost for maintenance & spares would be borne by Weststar during the lease period so there is lesser overheads as TUDM are not tied to that platform when come to decide to buy.
Is it a fair deal? Leases are never fair compared to buying on face value, you pay about the same monthly installments to rent nearly as much as to buy but you don't have to worry about maintenance & spares costs. So there are pros & cons, and leasing does make valid business sense to some. It certainly must have made financial sense to our stingy beancounters to approve it.
@gonggok
What do you expect TUDM to do when CAPEX is not there but OPEX is unused and there is urgent operational need for utility choppers?
The OPEX and CAPEX issue is a simple matter really to the government. The Finance Ministry could just transfer the money to one part easily. But as usual such things are difficult as no one wants to take the responsibility. Also there is also the fear that will become routine hence the decision not to do it. Its the same with RMN fixing it up its fleet by using the OPEX money saved by the previous chief as part of the 15 to 5 plan
I think so.... . Lease the assets until the RMAF decides what helicopter they really want and the Government gets its s_ _ t together.
Equally expensive to buy outright or to lease
The maths uses by our defence players are different somehow
5Zaft - An easy way to make politicians commit to a multi decade weapon acquisitions is to set up a local military industrial complex"
Must as well drill holes into our skills whilst we're at it. As it is our small and limited industry has had such a detrimental impact thanks to our neither here nor there self defeating politically driven policy.
5Zaft- " would face prospects of voters job loses if they cancelled anything"
Going by that reasoning orders would have long ago been placed for follow on Adnans and Kedahs to save jobs at Deftech and BNS. Plus, we'd also be buying more expensive ammo to save jobs at SME rather than buying cheaper alternatives from abroad.
Supplying defence product in malaysia is always about who do you know and never about what did your product can deliver, cost productivity,effectiveness or even opex or capex requirement.
CAPEX is upfront, OPEX is annual. Its easier to pry money from MOF if the amount is RM20m over 5 years than RM100m in Year 1. It could also mean government long-term budget is not stable. In other words, government cashflow is not stable and there is not enough reserves to smoothen out any future shortfalls (hence unable to commit monies up front). Long-run, owning the asset is always cheaper than renting. But it is what it is, rent is the way forward.
Hope the MPA and LCA gets funded in this Malaysia Plan. If it gets delayed and spills over to the next Malaysia plan, the Nuri replacement will have to compete with MPA and LCA funding. This creates the same problem faced by the Navy, where LCS is competing with LMS Batch 2 funding - because of the LCS issue, the Navy is essentially asking for RM3b for LCS and RMXb for LMS Batch 2.
Marhalim, what’s defence spending as % GDP at the moment? Should be app 6 b USD if its 1.5%, is that correct?
Tom Tom - "until the RMAF decides what helicopter they really want and the Government gets its s_ _ t together"
The RMAF knows what it wants and has known for years. Our defence policy is a reflection of many things which have gone to shit in this country. Getting it right requires deep soul searching , acknowledging what we've been doing for so long is highly flawed and self defeating and fundamental and institutionalised revamps.