Business

Geneva — Airlines are expected to earn $35.6 billion this year, “a record profit”, even if slightly less than original expectations, IATA Director General and CEO Alexandre de Juniac said on Thursday. 

Speaking at the IATA Media Day 2016, he said this “best performance in the industry’s history — irrespective of the many uncertainties we face”, is all the more impressive considering that the oil prices averaged at or were above $100 per barrel of Brent for three of the last six years (since 2010). He also forecast that the strong profitability will extend into next year.

“A net profit of $29.8 billion in 2017 will mean eight years in the black for the industry.  And it will be the third year in a row where the return on invested capital (7.8 per cent) will exceed the cost of capital (6.9 per cent),” he told the attendees.

But while the strongest financial performance is being delivered by airlines in North America, whose net post-tax profit will stand at $18.1 billion next year, Middle Eastern airlines have one of the lower break-even load factors. 

Average yields are low, but unit costs are even lower, “partly driven by the strength of capacity growth, forecast at 10.1 per cent this year”, according to IATA chief economist Brian Pearce.

Post-tax profit for Middle Eastern airlines is expected to slip to $0.3 billion in 2017, representing a profit of $1.56 per passenger and a net margin of 0.5 per cent, said Pearce.

The success of global aviation rests on safety, security, sustainability and global standards, but “while respecting them, airlines must run efficient businesses and generate enough surplus to reward their shareholders”, which is “difficult”, said De Juniac.

Nevertheless, “the industry has improved its financial resilience” and the airlines are in better shape to remain profitable while facing challenges, he added.

One way to deal with challenges is innovation through the use of technology.

“Smart security, fast travel, the e-Air Waybill and new distribution capability (NDC) are all examples”, said IATA CEO, who is particularly enthusiastic about NDC, expected to modernise the distribution process and enable airlines to better understand the needs of their customers. 

Airlines are catalysts for economic development. They deliver about a third of goods traded internationally — by value.

They support some $2.7 trillion of the gross domestic product (GDP), and employment levels associated with aviation have reached almost 69 million, according to IATA figures.

But while global connectivity promotes prosperity, “charges and taxes dampen demand” and that comes with an “economic cost”, said De Juniac, noting that this is “why IATA spends a lot of time fighting taxes and charges”.

The air transport association is also involved in “a constant battle to get governments to understand and fulfil the industry’s infrastructure needs”, considering that nearly 4 billion travellers are expected in 2017 and 7.2 billion in 2035, a growth that “will bring net economic benefits, but only if infrastructure development can keep pace”.

While admitting that “there is no magic solution for infrastructure”, De Juniac suggested that “when it comes to airports and air traffic management, that is best done [by governments] in consultation and partnership with airlines who are the users”.

That helps ensure “that we hit the mark on capacity, efficiency and affordability”, he said, also sounding a note of caution on infrastructure privatisation — particularly for airports.

“Governments must take great care to effectively balance public and private interests... Finding the highest bidder should not be the prime motivation. The focus must be on finding the best long-term solution to support the local and national economy. The entire process must be guided by iron-clad regulations to ensure that the privatised entity does not become an out-of-control monopoly,” he said.

“In connecting our world, aviation makes people’s lives better. It supports trade, creates business opportunities, facilitates the exchange of ideas, builds friendships across borders and develops global understanding,” he concluded.

He also expressed concern over the current protectionist rhetoric which he said “is gaining popularity and geographic scope”.

With a much revised line-up, new technology and more decidedly upmarket direction, Volvo is set to make an official comeback to Jordan early in 2017, with an eye on making significant inroads into the premium automotive segment.

In an exclusive interview with The Jordan Times, Managing Partner of GAA & Co. — Jordan’s recently appointed importer — Marwan Naffi said Volvo Jordan’s goal is to ultimately “reach at least 10 per cent market share” in the premium segment. 

Traditionally dominated by the Mercedes-Benz, Audi and BMW luxury troika globally and more decisively by Mercedes in Jordan, he said that Volvo is “ready to compete in every sense with its German premium rivals in Jordan”.

One of the oldest Volvo importers globally, Naffi said that GAA’s long experience “will be at the disposal of the Jordanian consumer”. Asked about possible conflicts of interest and whether GAA represents any other rival brands, he stressed the company’s automotive interests as being “mono-brand” and dedicated to Volvo.

Echoing such sentiments, the iconic Swedish brand’s Turkish-based regional office cited GAA’s “professional and skilled team”, “benchmark operations” and “strong association with Volvo”.

Also interviewed by The Jordan Times, General Manager of Volvo MENA-CIS Emre Karaer said GAA’s  “expertise and dedication to our brand in Lebanon can bring out great achievements in Jordan… and ‘help build customer confidence”, when asked whether the importer’s extensive experience with Volvo would outweigh its position as a newcomer to the Jordanian automotive sector.

Expected to open for business in January, Karaer believes that Volvo’s return to the “stable and important” Jordanian market is a “significant step”, adding that Volvo’s hybrid models represent a particularly “good prospect”, owning to Jordan’s hybrid-friendly tax regime.

Absent from the Jordanian market in recent years, Volvo has, however, been undertaking a more premium and up-market direction since 2010 — according to Naffi — and much further more with the launch of the recent high-tech SPA platform models. 

Set to be priced on “par with competitors” albeit with “more options” and “state of the art safety technology features”, Naffi believes that Volvo will be competitive in the premium segment and “regain the trust of the Jordanian consumer.”

Distinguished by its Swedish character and innovative approach to safety, Naffi said that Volvo’s Scandinavian design and luxury is “all about enhancing life experience”, coupled with a calming effect.

 In terms of safety, its approach is a “holistic” one according to Karaer, who added that Volvo’s driver interface is designed to be “as simple and intuitive as possible to reduce eyes-off-road time at “critical events”. 

Asked as to how Volvo’s autonomous driving systems would fare in the real world and especially in less than ideal road environments and driving styles, Karaer said that V Volvo will be testing autonomous drive cars in real-world situations. 

Committed to the highest safety standards and ambitions in the automotive industry, Volvo will start a 100-vehicle programme, in 2017 in Gothenburg, Sweden, during which families will ride autonomous drive versions of the XC90 in “everyday life”, while similar tests will be conducted in London and China to accurately benchmark the “efficiency and practicality of autonomous driving”.

AMMAN — Civil aviation and tourism executives, accompanied by government officials, have expressed their commitment to supporting the travel industry and tourism activity in the Middle East and North Africa (MENA) region. 

Taking part in the Arab Aviation Summit, a regional aviation event which concluded at the Dead Sea on Tuesday, the gathering reflected on the progress achieved so far in this area and new trends, shaping the future of the aviation-tourism industry, according to a statement released by the organisers.

Marking the summit, held this year under the theme, "Linking Cultures, Driving Economies", the Arab Tourism Organisation of the Arab League and the Arab Aviation Summit signed a memorandum of understanding at the event, pledging to boost future cooperation. 

The summit opened with a welcome address by the Arab Aviation Summit Chairperson Adel Al Ali, in which he highlighted the relationship between aviation and tourism while encouraging a collaborative approach to the region’s travel industry to achieve further growth.

Minister of Tourism and Antiquities Lina Annab, who attended the summit, concurred that aviation and tourism cannot be seen in isolation. 

Commenting on growth in the travel and tourism sector, which is outpacing growth in other sectors in national economies, she highlighted airport infrastructure, visa processes, and taxes and other levies as issues that need to be prioritised by governments and approached collectively. 

Bandar Fahad Al Fehaid, president of the Arab Tourism Organisation of the Arab League, said there is no tourism without aviation, and no aviation without tourism. 

Addressing the gathering, Fehaid said 12 per cent of the total work opportunities in the Arab world come from the tourism industry, adding that there is significant potential to increase this.

At the event, CNBC Arabia led an interview panel discussion on "Why Arab travel and tourism is a vital economic and cultural driver”, featuring Abdel Wahab Teffaha, secretary general of the Arab Air Carriers Organisation.

AMMAN — An agreement will be signed on Wednesday on how to maximise benefits from the Jordan-US Free Trade Agreement (FTA), according to Mohammed Bataineh, chairman of the American Chamber of Commerce in Jordan.

Speaking at a meeting with a US private sector trade delegation on Tuesday, he said the FTA helped boost the trade exchange from $350 million 10 years ago to over $3 billion; yet he conceded that there was still much more that could be done to ensure maximum benefits. 

“It is underutilised and still there is more room for potential for increased cooperation,” he told the attendees at the meeting with the visiting delegates, led by the US Department of State’s Special Representative for Commercial and Business Affairs Ziad Haider. 

He indicated that Jordan is a good stepping stone into the region and that many opportunities have not been tapped yet, under the country’s free trade accord with the US, the Kingdom’s top trading partner. 

“Ties between the US and Jordan are strong and strategic at all levels, and the FTA was a game changer… Garment is a major sector under the FTA deal, but there are many other sectors that can benefit from the FTA such as pharmaceuticals and engineering,” he said, indicating that the agreement to make the best use of the FTA will be signed with the USAID.

The delegation’s visit comes on the heels of the White House Call to Action for private sector engagement to support the global refugee crisis. The visiting delegation includes representatives of companies in the areas of food and beverage, energy and financial solutions.

On the sidelines of the meeting, in an interview with The Jordan Times, Haider reiterated that ties between the US and Jordan are strong and strategic, saying there is further room for development.

He underscored the importance of the FTA, saying it is in Jordan’s favour.

“We are here to build on the strong economic foundation,” he said, stressing that there is more potential to expand cooperation and trade in other areas.

Around 82 per cent of Jordan’s imports to the US are from the garment sector, he told The Jordan Times.

As the Kingdom is under pressure from regional crises n Syria and Iraq, coupled with an influx of Syrian refugees, “we are keen to attract more investments into Jordan and boost trade exchange”, he said. 

Highlighting promising sectors, he said those include ICT, pharmaceuticals and renewable energy.

BAGHDAD — Iraq's private banks are pinning hope on the oil-rich government to bring back into the black their balance sheets severely affected by the Daesh terror group take over of parts of the country.

In an interview with Reuters on Monday, Iraqi Private Banks' Association President Ali Tareq said that several lenders would not be able to pass a stress test of international standards at their current level of capitalisation.

“Collectively, banks have lost nearly 100 branches in hot areas with all their assets, funds, buildings, everything without any compensation,” he said. “If a stress test is held currently, it should take into consideration the current situation of the country and the Iraqi banking sector.”

The weakness of the private banks does not affect the banking sector as a whole, dominated by state-owned banks feeding on business from the oil-rich country's government.

But it is a setback for government efforts to develop the private sector and reduce the OPEC nation's reliance on oil.

As a way to reinvigorate private lenders, the central bank may offer them the possibility of setting up a 500 billion Iraqi-dinar fund that will invest in the government's “strategic infrastructure projects” like housing, transport and sewage projects, Tareq said.

The government would thus provide the banks with a steady stream of business that will help restore their balance sheets.

“The central bank is in the final steps, it has sent a letter to the participant banks to determine their shares, all banks are allowed to participate,” Tareq said. “Other than levying interest, the banks will be engaged in long-term, guaranteed projects.”

Other than damage to the assets of the banks and the banks clients, the militants' sweeping advance across northern and western Iraq also caused a rush on liquidity that weakened the leaders. People got worried that they would no longer be able to access their money deposited in banks. Iraq relies almost entirely on cash for day-to-day transactions.

Iraq has been prey to war and insurgency since the overthrow of president Saddam Hussein in 2003. As a result, Iraqis are reluctant to use banks in case violence prevents them accessing their cash or restrictions are placed on withdrawals.

Private banks suffered a lot more than the state owned banks that relied on government liquidity and transactions to stay afloat throughout the 36 years of wars and sanctions that the country went through.

Iraq's state-owned banks — Rafidain, Rasheed, Agriculture, Industrial, Real Estate and the Housing Fund — control together 86 per cent of total deposits or $48 billion, while the 45 private banks share the remaining 14 per cent, or $7 billion, said Tareq.

“There were many withdrawals of deposits by citizens because the circumstances at the time required that they have liquidity,” said Tareq. “Bank transactions were dealt a heavy blow at the same time, as lending and letters of credit” to the private sector “decreased as the government executed fewer projects”, he added.

SAN FRANCISCO — Apple has revealed it is investing heavily in autonomous vehicles in a letter asking the government to make it easier to develop self-driving cars.

The company is “excited about the potential of automated systems in many areas, including transportation,” Apple said in a November 22 letter to the National Highway Traffic Safety Administration (NHTSA) offering Apple’s opinion about draft regulations for the sector.

“Apple looks forward to collaborating with NHTSA and other stakeholders so that the significant societal benefits of automated vehicles can be realised safely, responsibly, and expeditiously,” the company’s director of product integrity Steve Kenner wrote.

Apple issued the letter because it is “investing heavily in machine learning and autonomous systems”, an Apple spokesman said in an e-mail to AFP.

“There are many potential applications for these technologies, including the future of transportation, so we want to work with NHTSA to help define the best practices for the industry.”

Rumours about Apple’s ambitions in the sector have circulated for years.

The company has a separate organisation called “Project Titan” that is developing automotive projects.

Although Apple has never officially confirmed the project, several of CEO Tim Cook’s comments have fuelled speculation.

After a $1 billion investment in a Chinese ride-hailing service called Didi Chuxing, he spoke of “some strategic things that the companies can do together over time”.

However, in early September, The New York Times reported that the group had narrowed its ambitions, laying off dozens of staff as part of the project’s “reboot”. 

Instead of designing and producing a complete self-driving car, the group will now concentrate on developing underlying technologies for autonomous vehicles.

In its letter, Apple urges the NHTSA not to penalise new participants in the sector by restricting the testing of cars under development on public roads, for which established automakers generally have exemptions.

“To maximise the safety benefits of automated vehicles, encourage innovation, and promote fair competition, established manufacturers and new entrants should be treated equally,” it says.

Apple also encourages data sharing, particularly for accidents, saying that would enable the industry to “build a more comprehensive dataset than any one company could create alone”.

Most major auto manufacturers and many technology groups are currently developing autonomous vehicles, considered to be the future of the automobile, along with electric power, with first production models promised for around 2020.

AMMAN — Airport International Group (AIG) has announced that as of the end of October 2016, the Queen Alia International Airport (QAIA) has welcomed 6,383,193 passengers, recording a 4.4 per cent increase compared to the same period in 2015. 

Moreover, year-to-date (YTD) aircraft movements (ACM) increased by 2.9 per cent to settle at 62,553 ACM while YTD cargo traffic figures increased by 2.2 per cent to reach 84,124 tonnes, the AIG, the Jordanian company responsible for the rehabilitation, expansion and operation of the QAIA said in a statement. 

In October this year, 532,542 passengers passed through the QAIA, resulting in an 8 per cent decrease compared to the same period of last year, during which the airport welcomed 578,867 passengers, the statement indicated. Additionally, QAIA registered 5,630 ACM as opposed to 6,129 ACM in 2015, indicating an 8.1 per cent year on year fall. Meanwhile, cargo rose by 0.9 per cent as QAIA handled 8,837 tonnes as opposed to 8,758 tonnes during the same month in 2015.  

“We are now experiencing a lull in airport activity, which is typical of this time of the year. 

Nonetheless, we look forward to witnessing the usual surge that takes place towards the end of the year during the Christmas and New Year holidays, when vacationers choose to travel again,” Airport International Group CEO Kjeld Binger said.

AMMAN — The Arab Air Carriers Organisation (AACO) general assembly elected Royal Jordanian’s (RJ) President/CEO Suleiman Obeidat as a member of the organisation’s executive committee during AACO’s 49th annual general meeting, which convened in Casablanca, Morocco, between November 28 and 30.

The AACO executive committee consists of the chief executive officers of nine elected active AACO member airlines, who hold a three-year renewable term.

It directs and supervises AACO’s work, as well as the performance of AACO’s secretariat general and its institutions. RJ participated in the 49th annual general meeting that brought together CEOs of AACO member airlines, AACO partner airlines and industry partners, according to an RJ statement.  

RAMALLAH — At first glance, Mashvisor is just one of thousands of websites specialising in US real estate.

But it has a unique feature, undetectable to customers: its designers created it in the West Bank and it is run from the Israel-occupied Palestinian territory. 

"The great thing about a start-up is you can work on it anywhere in the world. You can be in Palestine, you can be in Cambodia, Vietnam, China. It doesn't matter," explains Peter Abu Al Zolof, who founded Mashvisor more than a year ago with a friend. 

Last week, Mashvisor became the first Palestinian company to get the support of the influential American 500 Start-ups venture capital fund.

It is one of a number of Palestinian start-ups in the occupied Palestinian territories, long overshadowed by Israel's so-called "Start-up Nation".

The online platform automates and analyses US real estate data nationwide to find investors the best property deals.

As in Silicon Valley, the staff dress casually, drink coffee from state-of-the-art machines in garish colours, and pad through the office wearing US-made headphones around their necks.

But working in the West Bank brings unique challenges.

In October 2015, a wave of violence broke out across Israel and the Palestinian territories.

Abu Al Zolof's friend and founding partner Mohamed Jebrini, who lives in Hebron, found himself stranded in the city as roads were closed, 45 kilometres from their Ramallah offices.

"He was stuck in Hebron and I was stuck in Ramallah and we were still working on our company," explains Abu Al Zolof.

The American-Palestinian says the online nature of what they do means they can avoid many of the frustrations for other companies in the West Bank, where the Israeli army checkpoints often present very physical challenges to commerce.

"There are no walls, there are no challenges, there is nothing that can stop this kind of thing," he says.

"It's a virtual market, so there are no checkpoints where they tell you: 'You can't sell this. You can't take this out of the country’."

The company benefited from the support of the Ramallah-based Leaders, an organisation that helps nurture start-ups.

Shadi Atshan, Leader's director general, told AFP that in the start-up scene there was "no unemployment — unlike almost all other industries and economic sectors in Palestine which have high unemployment".

"Those with good skills can earn a very high income."

The unemployment rate in the occupied Palestinian territories is 27 per cent, according to figures from the Palestinian Central Bureau of Statistics.

The Ibtikar investment fund has invested around $800,000 (750,000 euros) in 10 start-ups so far, according to its Chief Operating Officer Ambar Amleh. She stresses their work is not charity.

"This isn't work that should be funded by donors or grants. The expectations of making money should be there from the beginning because we are creating companies," she told AFP.

Palestinians are still a long way behind Israel, where companies in Tel Aviv's start-up scene regularly sell for tens or hundreds of millions of dollars.

In 2013, Google bought the Israeli traffic app Waze for more than $1 billion, a figure unimaginable in the Palestinian scene.

But Amleh points out the huge government support for Israeli start-ups, which do not exist in the Palestinian territories.

"I think more and more people are starting to see that they really can make something they have been dreaming about come true."

Hussein Nasir Al Din and his partner Laila Aqal have a business inextricably linked to the conflict — monitoring the security situation in Israel and the Palestinian territories.

The Red Crow website, run out of a small office in Ramallah, monitors security developments and sends real-time alerts and maps to clients.

Their customers include UN agencies, diplomats and organisations that operate in the field and adjust their security programmes according to events.

Soon they want to expand to the Egyptian and Iraqi markets.

NEW YORK — Oil prices soared more than 8 per cent on Wednesday as some of the world's largest oil producers agreed to curb oil output for the first time since 2008 in a last-ditch bid to support prices.

Crude prices, however, are unlikely to skyrocket in reaction to the deal, but will instead take measured steps higher, traders and analysts said.

The Organisation of the Petroleum Exporting Countries (OPEC) agreed to cut production to 32.5 million barrels per day (bpd), Kuwait's oil minister said. The cuts include Iraq reducing output by 200,000bpd to 4.351 million bpd beginning in January. The country had previously resisted cuts, providing a hurdle to an agreement.

The cut was at the low end of production of a preliminary agreement struck in Algiers in September, and reduces production from a current 33.64 million bpd.

Non-OPEC member Russia has agreed to cut output by 300,000bpd. OPEC will meet with non-OPEC producers on December 9.

US West Texas Intermediate crude futures for January delivery rose $3.93 to $49.16 a barrel, a 8.7 per cent gain at 12:09pm Eastern (17:09 GMT). The move was the largest one-day gain since February.

Brent crude futures for January delivery rose $3.73 to $50.11 a barrel, an 8 per cent gain. That contract expires Wednesday. Brent futures for February rose 8.8 per cent, or $4.16 to $51.48 a barrel.

"It's going to take time to see whose going to abide by those rules," said Oliver Sloup, director of managed futures at IITrader.com. In the past, not all producers have complied with agreements on supply cuts, Sloup said. As a result, there is scepticism about how closely the production caps will be adhered to.

Kuwait, Venezuela and Algeria have agreed to monitor compliance with the OPEC agreement.

The market will grow in a measured way because traders with short positions have already exited crude futures, according to Dominic Chirichella, senior partner at the Energy Management Institute.

"There's going to be an air of cautiousness and rightfully so," he said. "I think the market is going to move to the upside, but in a metered, cautious manner over a period of time."

The oil rally ricocheted through the market, with stocks and bond prices reaction to the move.

US-listed oil companies including Exxon Mobil Corp., Chevron Corp. and Schlumberger saw shares rise as crude prices climbed. Some US producers saw shares spike more than 10 per cent, including Pioneer Natural Resources, Hess Corp. and Anadarko Petroleum.

Deferred spreads for US and Brent crude futures also rallied on the OPEC deal.

A weekly government report on US crude oil stockpiles had little sway in the market, which remained focused on the OPEC deal. US crude stockpiles unexpectedly fell 884,000 barrels in the week, compared with forecasts of a 636,000-barrel increase.