KUALA LUMPUR (Sept 19): Defence contractor Aerotree Defence & Services Sdn Bhd has filed a RM353 million lawsuit against the Malaysian government and Defence Ministry for cancelling a five-year lease agreement involving four US-made Blackhawk UH-60A helicopters for the Malaysian army's air force unit.
Filed through Messrs Hafarizam, Wan Aisha & Mubarak at the Kuala Lumpur High Court, the suit names the Defence Ministry secretary general, the ministry, and the federal government as defendants.
In the statement of claim sighted by The Edge, Aerotree Defence is asking the court to order the Defence Ministry and the government to follow through with the helicopter lease deal based on the acceptance letter dated April 17, 2023. If the deal can’t be carried out, the company wants:
- RM17.5 million in special damages
- RM38.7 million in further damages
- US$69.95 million (about RM297.3 million) in additional compensation
Aerotree is also seeking to block the government from using a RM1.87 million bank guarantee it provided, and is asking for general damages for loss of reputation, plus exemplary and aggravated damages to be decided by the court.
In its 31-page claim, Aerotree said the government had agreed to lease four Blackhawk helicopters for five years at RM187.5 million. The deal was a Private Finance Initiative, meaning the government wouldn’t bear any cost or risk, as Aerotree would own, operate, and maintain the helicopters. The company said the helicopters were fully mission-capable, including for air force transport operations.
Aerotree is seeking a court declaration that the government’s termination of the agreement on Oct 31, 2024, is null and void.
Helicopter deal timeline and delays
Under the agreement, Aerotree was to deliver two helicopters within six months of the April 2023 acceptance letter, and the remaining two within nine months. The company also had to provide a non-cancellable RM1.87 million implementation bond, which it secured from Perwira Affin Bank in June 2023.
Aerotree was also required to run a training and industrial collaboration programme. For this, it requested access to the Kuantan Air Force base to prepare a maintenance manual and obtain certification as an Approved Maintenance Organisation.
In July 2023, Aerotree signed a deal with Turkey’s Havelsan for Blackhawk simulator training for 14 RMAF pilots. The following month, it signed a sales agreement with Slovakia’s Training Academy to purchase and upgrade four Blackhawk helicopters.
Due to technical modifications, pilot training, and delays caused by the Russia-Ukraine conflict, Aerotree requested three extensions — up to Oct 30, 2024 — for the helicopter deliveries. However, penalties for late delivery (LAD) still applied.
Aerotree claimed the Defence Ministry and government failed to assist it in securing a loan from SME Bank, which was going through a board restructuring. A change in the Defence Minister further delayed necessary documents for loan approval. Despite this, the loan was approved but the company had yet to receive the deed of trust letter from the ministry so that the first payment could be made.
The company said the government was aware of the reasons behind the delays but imposed unfair extension conditions that made it harder for Aerotree to complete the deal, ultimately setting the company up to fail.
Allegations of unfair termination
On Oct 31, 2024, Aerotree Defence received a termination letter from the Defence Ministry for failing to deliver four Blackhawk helicopters as agreed.
Aerotree appealed the termination, saying the helicopters were already registered with the US Department of State and were awaiting approval under the International Traffic in Arms Regulations (ITAR), which is required before shipment to Malaysia.
The company argued that the deal should not have been cancelled without further negotiations, especially since they expected to be charged late delivery penalties (LAD) instead.
They also claimed that the ministry never officially signed the main service contract, which was needed to approve their request for deadline extensions. A key financing document, the Deed of Assignment (DOA), was also submitted to the ministry’s legal division in June 2024, but no action was taken.
Aerotree said the termination was unfair and done without proper process, despite the company fulfilling its responsibilities and keeping the government informed. Their appeal letters in December 2024 went unanswered. The government also seized the RM1.87 million bond, and Aerotree is now facing legal action from its Slovakian supplier, damaging its reputation.
The claim also highlighted the government’s new helicopter rental tender on Aug 4, 2025, worth RM185.2 million, closing on Sept 23. It said although Aerotree can reapply, there's no guarantee it will win the bid, and it risks going through the same delays again.
The company, which now has ITAR and export approvals, claimed the termination was done in bad faith, causing major financial and reputational harm.
The case has been fixed for case management on Oct 23 before a senior assistant registrar.