This article first appeared in The Edge Malaysia Weekly on February 24, 2025 - March 2, 2025

The government’s RM16.6 billion, 15-year lease for 28 AW149 helicopters from Weststar Aviation Services Sdn Bhd was in the news again last week, with Defence Minister Datuk Seri Mohamed Khaled Nordin defending the lease.

In parliament last Thursday, Khaled said the lease covers maintenance, repair and operations (MRO), training, insurance and financing costs. Such a lease would help the government save on additional or incidental expenses that cannot be avoided under conventional procurement, he explained.

Still, many have raised the question as to whether the government is being penny-wise and pound-foolish given the high cost of the lease.

This is because in an outright purchase, the 28 helicopters may cost less.

On the cost of an AW149 made by Leonardo SpA, artificial intelligence tools turned up estimates of between US$13 million and US$30 million each. The cost varies depending on avionics, armour, weapons system and mission-specific equipment. The contract could also include training, logistics and infrastructure, all of which will add to the cost of the helicopter.

Other factors influencing the price include customisation, support packages, the number of helicopters ordered (bulk orders may reduce the unit price) and government agreements. Given that defence contracts are rarely disclosed publicly, the precise cost of the 28 helicopters will remain a guessing game.

However, assuming a price tag of US$10 million each for the helicopters, 5% borrowing cost and 10% maintenance cost annually over 15 years, the present value of the “project” in an outright purchase and to maintain 28 AW149s over the period works out to close to RM3 billion. 

This is much less than the RM16.6 billion. Of course, the gap closes if insurance and training costs are included but would it touch RM16 billion? This may be possible if the price tag for the AW149 is much higher than the US$10 million assumption in this back-of-the-envelope exercise.

The government’s decision to lease the 28 helicopters marks a change in its procurement policy, which has traditionally been outright equipment purchases. Leasing results in lower initial expenses and allows continuous access to new and efficient equipment.

The minister has said that the initiative aligns with the government’s strategy to optimise resources given budgetary constraints.

However, given that defence contracts are often murky or shrouded in secrecy, will we ever know the details of the 28 AW149s in order to conclude whether taxpayers’ money is being spent well?

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