Royal Jordanian sets commercial targets on its new road to profitability

1 November, 2017

Royal Jordanian has revealed a five year plan to become the number one network carrier in the Levant and hopes that market niche will allow it to operate successfully in a highly competitive region that has seen a huge rise in airline capacity over the past couple of decades.

The airline is already back on the path to profitability after returning to the black for the first time this year in June, leading to a much improved Q3 performance with net profits rising to JD31.8 million from JD12.9 million in the same period last year. The strong Q3 performance has offset the poor performance from the first five months of the year and transformed the cumulative net loss of JD27.8 million to a small JD5.4 million for the first nine months (versus a JD-2.7 million net loss in 2016).

The airline's new strategy, which is expected to deliver unit revenue gains of around 7% and lower unit costs by an estimated 6%, is based on three main pillars centred around sustainable profitability through increasing operating margins; delivering a consistent customer experience across all touch points and attracting and retaining a talented and skilled workforce.

A key part of this will see changes to the Royal Jordanian fleet and network and a move towards a single supplier for its narrowbody fleet. According to the CAPA Fleet Database, Royal Jordanian currently operate a mixed fleet of Airbus and Embraer models, while the Boeing 787 is its sole widebody.

TABLE - Royal Jordanian operates a fleet of 26 passenger and freight aircraft, but plans to grow to 30 aircraft by 2021 as part of a five year development planSource: CAPA - Centre for Aviation Fleet Database

Alongside the fleet changes the carrier will add more economy class seats and reduce the number of business class seats on its narrowbody aircraft to "increase the earning capacity" and generate more revenue. This strategy will enable network changes to enhance connectivity through the airline's hub at Queen Alia International Airport in Amman, while simplifying fleet scheduling to run a consistent flight offering and more easily supporting future growth.

Royal Jordanian already plans to open new international routes in the coming five years to Washington, USA; the Scandinavian capitals of Copenhagen, Denmark and Stockholm, Sweden and add flights to Kyrenia in Northern Cyprus. It will also resume flying on some of its previously suspended routes including Damascus, Syria; Mosul, Iraq; Aden and Sanaa, Yemen and Benghazi, Libya.

It will also seek to grow its presence in the Jordanian port city of Aqaba on the Red Sea. In collaboration with the Aqaba Special Economic Zone Authority and the local tourism entities, it aims to boost international arrivals into Jordan's sole coastal city from several countries around the world. However, the airline's CEO, Stefan Pichler urged the Aqaba authorities as well as business community to "support us to the same degree we want to support them, and to the best of our economy".

At the recent CAPA-ACTE Global Summit in London, Mr Pichler said "floods of overcapacity" were putting a lot of pressure on the Middle East market. Speaking to The Blue Swan Daily on the sidelines of the conference he blamed "non-commercial rivals" in the region for this problem and highlighted the need for airlines such as Royal Jordanian to "grow modestly" focus on its own "sustainable market niche" and ensure it is "doing things right, not just doing the right thing."

WATCH our EXCLUSIVE CAPA TV video interview with Mr Pichler, where he highlights that Royal Jordanian needs to act and behave like a commercial entity, not a government subsidiary and deliver this new strategy that will allow it stand on its own feet as a profitable business.