RJ witnessed significant operational improvement in 2019

Royal Jordanian (RJ) has released its 2019 financial figures.
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RJ transported 3.3 million passengers last year. Image: Royal Jordanian

 

The meeting was headed by RJ Board of Directors chairman Said Darwazeh; attending the virtual  meeting were also board members, RJ President/CEO Stefan Pichler, the deputy for the companies’ general controller Ayman Al Sharairi, in addition to Marwan Mayata and Mohammad Al Qudah, representing the Government Investments Management Company,  RJ accounts auditor Ernst and Young and some shareholders; the latter, in their entirety, own 93% of the company capital, which amounts to 274.6 million shares.

 

The meeting discussed the board’s report on the 2019 financial results and the business prospects for 2020, as well as the auditors’ report, the budget, profits and losses. The General Assembly members agreed to all the articles under discussion.

 

During the meeting, new Board of Directors was elected for the coming four years. Its members are: the Government Investments Management Company, which owns 82% of RJ shares and it is automatically represented with seven members out of nine on Royal Jordanian’s Board of Directors according to Article 135 of the Companies’ Law, while the voting process for the remaining two members took place electronically. The seats were awarded to: the Social Security Corporation and Mint Trading Middle East Limited.

 

In their speeches addressed to the shareholders in the annual report 2019, Darwazeh and Pichler presented the financial and operational results achieved last year, and the impact of COVID-19 on RJ’s business.

 

Darwazeh said that RJ witnessed significant improvement in the operational and financial KPIs. Last year, RJ registered JD10.4 million net profits after tax, while in 2018 it had posted a net loss of JD5.9 million. The increase in profitability was achieved despite the negative impact implementing the International Accounting Standard 16 had on the company.

 

He added that the company's gross profit amounted to JD113 million, a 30% increase over 2018 when the company's profit stood at JD88 million. The net operating profit also jumped from JD16.6 million in 2018 to JD45.5 million in 2019, signifying a considerable 174% growth.

 

Darwazeh noted that the company's operating revenue during last year reached JD661 million, which was close to that of 2018. Meanwhile, RJ reduced the operating cost by 5%, getting it down from JD576 million in 2018 to JD547 million in 2019. RJ paid JD146 million for fuel in 2019, or 8% less than the JD159 million it paid in 2018.

 

Darwazeh highlighted the huge negative impact the COVID-19 pandemic has had on RJ, and the ensuing decisions aimed at protecting the health of the Jordanian society, including closing down Queen Alia International Airport starting with mid-March and halting all RJ passenger flights. In this regard, he stressed RJ’s need to obtain direct and indirect government support to be able to face the resulting financial crisis and to continue to play the significant commercial and social role it has been playing being the national carrier of Jordan. 

 

Pichler expressed satisfaction with the achievements, unprecedented in the company’s history, particularly with the airline operations. RJ increased the seat load factor to 74.2% from 73.8% in 2018. The increase is important particularly considering that the load factor was around 65% in the past years. As such, 2019 marks the highest figure registered in regard to the seat load factor in the airline history.

 

He said that the positive financial results of the company were obtained through the efforts exerted by all employees who worked together with team spirit to implement the pillars of the turnaround plan the company launched in the second half of 2017 and make them a reality despite the fierce competition from low-cost airlines that have been operating regular flights to Amman and Aqaba for more than a year now, which added to the significant competition posed by other airlines operating in the Middle East.

 

 

Pichler said that RJ transported 3.3 million passengers last year, an increase of 38K over 2018; the increase was due to the growing traveler demand for RJ services, robustly advocated by the sales promotions conducted by the company in the local and international markets throughout the year.

 

Pichler also pointed out that several operational and financial key performance indicators witnessed an increase during 2019, compared to the previous year, including a 40% increase in ancillary revenues and a JD1.6 million increase in excess baggage revenue.

 

He said that the effort exerted to increase the number of passengers and revenues went hand in hand with RJ staff's hard work to boost the company brand, improve its services and enhance customer confidence.

 

RJ, he said, took several measures to reduce the Cost per Available Seat-Kilometer (CASK) by 2%.

 

He underlined the considerable impact COVID-19 had on the global air transport industry. RJ, he said, is not going to be spared; it will be directly and negatively affected by the outbreak of this disease this year and in the following years, due to the complete stop of operations for a long period of time and to the strict restrictions imposed in Jordan and globally. He stressed that RJ is committed to taking all precautionary measures to maintain the wellbeing of its passengers and crew, in cooperation with the concerned authorities in Jordan and the world, after airports open and flights are resumed.   

 

Pichler stressed that Royal Jordanian is facing considerable operational and financial challenges during 2020 as a result of the Corona pandemic. The company incurred a JD25.5 million net loss in Q1 this year, compared to the JD5 million loss in the corresponding period of 2019, due to a 19% decrease in passenger numbers, a drop of 5% in the seat load factor and of 22% in operational revenues, in addition to the slump in all operational and financial key performance indicators.

 

He said that the negative repercussions of COVID-19 on Royal Jordanian will be felt even stronger in Q2 2020 and the subsequent months. Even if the company resumes partial and gradual operations, one can expect a sharp decrease in the demand for travel regionally and globally, said Pichler, expressing hope to receive government support to help RJ overcome this crisis, particularly in view of the success registered by the company in 2019, which saw RJ reach profitability.