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Royal Jordanian Narrows Losses But Could Indirect Competition From Ryanair Cause Pain in the Future?

Royal Jordanian Narrows Losses But Could Indirect Competition From Ryanair Cause Pain in the Future?

Much like the Jordanian economy, the country’s national airline, Royal Jordanian has been suffering quite significantly over the last few years.  Once one of the strongest players in Middle East’s aviation sector, Royal Jordanian has dwindled into a marginalised and rather niche carrier as other airlines like Emirates and Qatar Airways have shot ahead.

Despite being a member of the Oneworld alliance, nowadays Royal Jordanian is much more of a point to point carrier – serving just 43 destinations mostly in Europe and the Middle East, as well as several cities in North America including New York and Montreal.

Last year, Royal Jordanian headhunted the German airline executive Stefan Pichler in an attempt to turnaround the loss-making national carrier.  Pichler previously managed now-defunct airberlin and also led turnaround efforts at Fiji Airways as well as Jazeera Airways.

And it looks like Pichler has had made some progress with his latest project.  Royal Jordanian today posted its financial results for the first half of 2018, announcing it had reduced its losses in the period to $17.9 million USD – down from the huge $37 million loss it made in the same period in 2017.

Or to put it another way, the airline reduced its losses year on year by some 52%.

Royal Jordanian even managed to improve its balance sheet while facing a rapidly increasing fuel bill after global oil prices shot up in the past 12-months.  A problem faced by many airlines around the world.  In fact, RJ says its fuel prices went up by 27% in just the first six months of 2017.

Much work has been done to cut costs but Royal Jordanian has also been helped by a big tourism drive and wave after wave of price promotions which have pushed passenger numbers up some 6% and led to an improvement in the seat load factor from 68.4% to 72.8%.

Still, that’s a poor seat load factor by global standards, especially when put into the context of RJ’s deep fare discounts – although the improvement is a welcome improvement and one that Pichler will be looking to build upon.

Pichler says he’ll be looking to take advtange of Jordan’s burgeoning inbound tourism economy as part of RJ’s turnaround (passenger traffic to the Queen Alia International Airport rose some 7.6% in the first four months of the year alone) while also taking advantage of special charter services – in particular, Hajj flights.

But Royal Jordanian doesn’t have a monoply on serving the country’s capital, Amman.  Earlier this year, budget carrier Ryanair announced a huge increase in services to Jordan – going from serving the country from just one destination with four weekly services to 21 weekly flights from 13 destinations.

This is a huge expansion although interestingly, Ryanair has opened up routes from airports which are currently served by Royal Jordanian – no doubt a precondition of the Jordanian authorities granting Ryanair landing rights.  Whether this massive increase in seats to the country will effect RJ going forward remains to be seen.

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