KUALA LUMPUR (May 12): After initially describing its aviation venture as a “non-binding” and “exploratory” agreement, Cape EMS (KL:CEB) revealed it had in fact paid RM14.6 million to Aeronas Aerocraft Sdn Bhd between March and December 2025 under a 2025 memorandum of understanding (MOU) to develop an aircraft assembly project in Johor. However, the group later found that the venture allegedly failed to meet its promised milestones, leading to the breakdown of the deal.
In a reply to Bursa Malaysia’s queries on May 11, 2026, which included details on the terms of the MOU and the circumstances leading to Aeronas' RM279 million suit, Cape EMS on Tuesday said under the March 9, 2025 agreement, its unit Cape Manufacturing (M) Sdn Bhd (CMM) committed RM20 million in two tranches.
The first tranche of RM10 million was meant to build and equip an aircraft assembly workshop capable of producing up to eight planes a year, set up research and development and training facilities, develop aircraft engineering designs and specialised equipment, run promotional and public relations campaigns for a planned IPO, and complete the facilities within about three months. In return, Aeronas agreed to give CMM a 30% stake in the company.
The next tranche of RM10 million was meant to cover the cost of shipping two fully-built aircraft and two semi-built aircraft from the US to Malaysia, as well as bringing in US technical teams to train local workers and oversee the project. It also included paying for staff, operations and other related expenses, with the US team required to arrive in Malaysia at least a month before the aircraft shipment to prepare for construction work.
CMM also agreed to rent its Senai factory to Aeronas and provide an additional RM40 million loan to expand the plant’s production capacity to 30 aircraft annually.
The revelation comes after Cape EMS issued a statement over the weekend to clarify that CMM's deal with Aeronas remained only at an exploratory, non-binding MOU stage and never progressed into any binding commercial, operational, or investment agreement. It had said that the agreement was subject to conditions precedent and no further implementation agreements were signed.
In detailing the circumstances leading to the filing of the CMM suit against Aeronas, Cape EMS said on Tuesday CMM entered the agreement after Aeronas allegedly represented that it controlled key Federal Aviation Administration of the United States of America certifications, aircraft technology, assets, and intellectual property needed for the project, and that the venture was commercially viable and achievable within the proposed timeline.
However, after payments were made, CMM claimed Aeronas failed to deliver its obligations: the aircraft assembly site was mainly used as office and storage space, the four US aircraft were never assembled, there was no evidence most US engineering teams were deployed, except one engineer, and project milestones were not met.
The dispute escalated when Aeronas issued a RM50 million demand on March 11, 2026, which CMM rejected, stating Aeronas had not fulfilled key requirements such as licensing of aircraft manufacturing technology, sales orders for 15 aircraft, and confirmed bookings for aircraft worth RM229 million.
This led Aeronas to file a RM279 million lawsuit against CMM in the Johor Bahru High Court on May 5, 2026.After which CMM filed a counterclaim for RM15.05 million against Aeronas, PetraX5 Sdn Bhd, Raja Shazreen Petra Raja Azman Shah, Raja Iman Petra Raja Azman Shah and Kamarulzaman Abdul Karim.
Cape EMS said CMM is seeking to recover about RM15.05 million it claims to have spent under the March 9, 2025 MOU with Aeronas, along with declarations that the agreement was lawfully terminated and that the funds were held under a constructive trust. CMM is also asking the court for repayment of monies paid, an account of how the funds were used, return of assets or benefits provided, as well as additional damages, interest and legal costs.
The group said its maximum exposure is about RM5 million and does not expect material financial or operational impact, noting that CMM is a small subsidiary contributing less than 5% of group net assets.
Shares of Cape EMS closed up two sen or 6.9% to 31 sen on Tuesday, giving the group a market capitalisation of RM307.52 million.