Royal Jordanian : Ordinary Annual General Meeting

Amman, Sept. 21, 2014 - The RJ general assembly held its 7th ordinary annual general meeting on September 21 at the Sheraton Hotel, Amman, presided by Chairman of the RJ board of directors and President/CEO Nasser Lozi.

Attending were members of the board of directors, the companies' general comptroller Burhan Akroush, Ernst and Young auditors of RJ accounts, and a number of shareholders owning 64% of the company capital, which amounts to 84.3 million shares/dinars.

In his opening speech, Lozi said that as shareholders and representatives of shareholders, "we are keen on the RJ progress and future, to always be the airline that plays the role it was first established for, 50 years ago, in order to serve the Hashemite Kingdom of Jordan".

He added that RJ is a public shareholding company that works on commercial basis and highlighted the airline's keenness to improve its financial results and achieve a return on investment for the shareholders. In this regard, he pointed out that the company's contribution to the gross domestic product in Jordan amounted to JD378.5 million last year, with an average of 2-3%, thus exceeding the contribution of significant economic sectors in the gross domestic product in Jordan.

Through its mission and goals, he said, the company is not only a shareholding company, it is a big national company that has sovereignty and economic dimensions. It is the national carrier of Jordan, connecting the kingdom with a large number of countries and mirroring a bright image of Jordan to the world.

Lozi expressed appreciation to the major shareholder, the government, which, he said, exerted relentless efforts to support the company and enable it to overcome the financial challenges it is facing. These efforts help RJ continue to play its national role, in parallel with undergoing the required corrective procedures to restructure itself in several aspects.

Meanwhile, he said, the government and the board members are studying a number of options that are bound to help the company return to profitability and secure a bright future.

With its qualified human capital, its revised route network, its modern fleet of aircraft, competitive services to passengers and highest safety standards, RJ will be able to become stronger, Lozi said.

At the beginning of this year, RJ was named one of the top 10 safest airlines in the world in 2013 on the world's best one-stop airline safety and product rating review website.

The effect of instability in the region

Lozi pointed out in the annual report, which was also distributed to the shareholders, that 2013 continued to see the instability that our region has been going through since 2011.

Security and stability are top drivers of tourism and air transportation in the world. Thus, tourism and the air transport industry are the first victims of unrest, because they directly reflect on the load factors, the ticket fares and eventually the final results of airlines.

Lozi said that RJ is operating from the heart of the Middle East, which is surrounded by unrest. Its operations saw major changes and its route network was highly affected; Damascus and Aleppo, two stations of a strategic significance to Royal Jordanian, are still suspended. The two Syrian stations, added to Beirut, are considered feeding routes for the RJ flights to North America and Europe. Last year, the load factor to these destinations went remarkably down.

He added that the airline had to halt operations to three Libyan cities and one in Iraq this year. RJ also had to reduce frequencies to some destinations, the most significant Beirut, due to the low demand for travel to the Lebanese capital. He said that the company incurred losses when it had to change the route between Amman and Beirut in March 2013. The flight duration now takes one hour and 45 minutes instead of one hour, a result of avoiding flying over Syrian airspace.

According to Lozi, RJ is running its services under difficult operational conditions. It was highly impacted by the low demand on travel and tourism to Jordan and the Arab world, particularly from the traditional markets of Europe and the Far East, since tour operators look at the Middle East as one tourism station.

2013 results

Lozi said that these factors contributed to the 2013 operational and financial results. RJ used to achieve a 15-20% growth in the number of passengers and revenues year on year. Last year, however, the number of passengers declined by 3%, which resulted in a decrease in revenues from JD802 million in 2012 to JD744 million in 2013.

He said that the company did its utmost to cut costs without affecting the level of services to passengers. The cost reduction efforts resulted in bringing down the operational expenses from JD722 million in 2012 to JD713 million in 2013.

Lozi also pointed out that instability was not the only challenge faced by RJ in 2013, but also the intense competition among regional airlines, which had a big role in reducing ticket prices, as well as the high fuel bill paid by the company last year, which constituted 38% of the total operational cost. He said that in spite of the company's unsatisfactory financial results, various other indicators show that RJ is a successful and progressive airline that competes with big international airlines in terms of ground and air services, qualified staff, technology, and safety and security standards it adopts.

Steps taken to improve the state of the company

Lozi pointed out that Royal Jordanian has taken many steps and measures in 2014 to improve the performance of the company and enable it to achieve profits. He added that the airline is determined to generate ancillary revenue and find different sources of income by investing in different areas in the aviation industry, such as aircraft maintenance, ground handling and airport services.

RJ will enter these fields in new markets and regional airports, thus contributing to developing and building up the aviation industry in neighbouring countries, added to its contribution to the progress in the Jordanian airports.

At operational level, 2014 marks a new positive turning point in RJ's history and fleet. Starting with the end of August this year, the airline received the first Boeing 787 aircraft (Dreamliner). The company will add four other new 787s by the end of 2014; the rest of the ordered aircraft will join the RJ fleet in the upcoming years, replacing the Airbus 340s and 330s.

The new Dreamliner, with its host of new technologies and fuel efficiency features, will operate on RJ's medium- and long-haul routes, opening new horizons and markets for the airline in different countries around the world. It uses 20% less fuel than today's similarly sized planes.

The airline also phased out a number of its aircraft during 2014, due to the fact that the company decided to forgo some destinations on its route network that is constantly reviewed by the airline.

Due to the weak economic feasibility, RJ decided to shut down its operations to Milan, Colombo, Accra, Delhi, Mumbai and Lagos, and passed on the Sharm Al Sheikh operations to Royal Wings. It also reduced the number of flights to Beirut from four to two daily, based on a codeshare agreement concluded recently with the Middle East Airlines.

During the meeting, Lozi responded to the shareholders' questions about the airline's performance and plans.