RJ’s ‘turnaround plan’ to enhance profitability begins to bear fruit

AMMAN — Royal Jordanian's (RJ) financial figures for 2017 showed that the national carrier has achieved positive results in the second half of the year, after a "very weak first half", the company's Board of Directors Chairman Said Darwazeh said on Thursday.

While a net profit before tax of JD468,000 might not be significant, Darwazeh explained, it reflects the effectiveness of the turnaround plan towards profitability, implemented in the second half of 2017. This net profit is the first positive outcome of the five-year strategy implemented by RJ, Darwazeh said, according to an RJ statement sent to The Jordan Times. 

Speaking at the RJ General Assembly's ordinary and extraordinary meetings, held on Thursday at the InterContinental Hotel, Amman, Darwazeh highlighted the significance of this result, when compared to the net losses incurred in the first six months of 2017, which amounted to JD26.3 million due to commercial challenges and the decrease in ticket prices due to fierce competition, increased capacity in the regional markets and operating costs that grew by 3 per cent because of the 28 per cent rise in fuel prices which could not be compensated in the ticket prices.

RJ President and CEO Stefan Pichler explained how RJ was able to stage a strong recovery after a weak start in the fiscal year 2017. 

At the end of the first five months of last year, the airline had very weak revenues, which were on the verge of "dropping even further into the operating loss zone this year", but that the commercial performance recovered considerably and the load factor performance was significantly enhanced while stabilising the fares in the second half of the year.

He said that the revenue management, the sales and marketing strategies were completely changed in order to attract new customers for the airline, and "that worked very well". So, the recovery in the second half of the year was the fruit of a strong revenue performance across the network, noting that the airline achieved a positive operating cash flow of JD22.8 million in 2017, according to the statement.

During the extraordinary meeting, the shareholders approved the increase of RJ’s authorised capital by 28.2 million shares to become 274.6 million shares, the statement added. 

The additional capital increase will be offered through a private placement to the Government’s Contributions Company at a par value of JD1 per share with a discount of 610 fils per share, i.e. 390 fils per share. 

The amendments on the establishment contract and the bylaws of the company were also approved to reflect this capital increase, according to the statement. 

Darwazeh explained that the 28.2 million share capital increase is part of a previously approved plan, assuring that this increase in capital will not lower the number of the shareholders' shares by any means, and the new capital will reflect positively on the airline’s future and improve its financial situation.