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Royal Jordanian cuts seasonal Q1 losses by half

Posted 2 May 2018 · Add Comment

Royal Jordanian President/CEO Stefan Pichler has announced the financial and operational figures the company attained last year and in the first quarter of 2018.

 

Pichler highlighted the fact that the company’s turnaround plan towards profitability launched in the 2nd half of 2017 started to show positive outcomes as the airline achieved a JD468 thousand net profit before tax, a figure that might not be significant but that is a strong indicator of the improvement of RJ’s overall performance; in the first six months 2017, it incurred net losses of JD26.3 million. 

He said that in the second half of 2017, the company's performance started to show remarkable progress after it took effective measures to increase bookings, launched a series of sales promotion campaigns to encourage customers to travel during the low seasons (fall and winter), and started implementing the 5-year turnaround plan which will affect different operational aspects and is based on clear pillars.   

Pichler added that the positive results, due to enhanced commercial performance and the turnaround plan, began to show in the fourth quarter of 2017.

In the third quarter last year, the company witnessed great results and achieved a net profit of JD31.8 million, covering the losses of the first half and enabling the company to register a JD5.4 million net profit in the first nine months; 2017 ended with net profits while it reached JD24.6 million net losses in 2016.

Pichler said that the positive results were also due to the 15% increase in the number of passengers and the 9 points increase in the load factor in the last quarter of 2017 that led to an annual increase of 7% in the number of passengers and 5 points in the load factor, which reached an average of 71% in comparison to the seat load factor in 2016, which was 66%. Thus, revenues went up in 2017 by JD25 million, to reach JD623 million, a 4% increase over the JD598 million revenues in 2016. The net operating profit rose to JD12 million in 2017 from JD5 million in 2016.   

First quarter results of 2018:

Pichler said that most airlines usually record seasonal losses during the first quarter of a year, due to lower demand on travel and tourism, yet in 2018, RJ was able to cut those losses significantly due to a strong revenue performance.

Seasonal losses Q1 were only JD13.8 million, a significant improvement against the JD26.3 million losses recorded in the first quarter of 2017. 

Pichler added that this outstanding performance in the first quarter was the result of an increase in overall revenues, which reached JD143 million, an increase of JD16.6 million over the estimated budget and JD16.9 million over the first quarter of 2017. Revenues in all business segments witnessed a noticeable surge; revenues from passengers sales went up by 13%, cargo sales revenues by 18%, cargo warehouse revenues by 46% and online ticket sales revenues by 73%, he said. The revenues attained from the RJ-owned Tikram Airport Services Co. increased by 28%.

On the operational side, Pichler said that 744,000 passengers flew on board RJ planes in the first three months of 2018, against 698,000 passengers in the same period of 2017, a 7% increase compared to last year

He stressed that the turnaround plan projects are being implemented and the company's different operational and commercial departments are witnessing great progress.

The 5-year turnaround plan, which runs until 2022, encompasses major initiatives that are expected to enhance unit revenues by 7% and lower unit costs by 6%, he said, adding that it focuses on RJ’s product, in addition to the innovative electronic travel services that will facilitate all travel procedures and enhance revenues.

Pichler added that the turnaround plan is also reviewing RJ’s business portfolio, the activities of some "hidden champions", such as the loyalty program Royal Plus, Royal Tours and Tikram Airports Services Company, which, along other programs, "have to be developed much further to become valuable assets for our company".

He expressed optimism for 2018, saying that the first quarter of this year has seen a remarkable growth above the same period in 2017. This, again, was driven by a much stronger commercial performance.

RJ now has stronger connectivity at its home airport in Amman, and that makes possible more network sales. Also, the marketing activities are now much more retail focused and follow an aggressive pricing strategy.

As for the challenges in the year ahead, foremost among them will be the entry of low-cost airlines into Jordan. The management works hard to face the challenges and turn them into opportunities.

In parallel, the 5-year turnaround plan was conceived to redesign the company and make it able to withstand all future challenges. This includes the operational and commercial efficiencies, as well as a review of all the business activities driven by the core strategy of making RJ become the leading network carrier in the Levant.

Regarding the route network and the fleet, Pichler said that the turnaround plan also includes opening three international destinations, Washington, Stockholm and Copenhagen, the latter beginning of June. Eight destinations on RJ’s route network are still suspended due to security instability: Damascus, Aleppo, Mosul, Tripoli, Benghazi, Misrata, Sana and Aden.

The five-year turnaround plan entails modernising the medium- and short-haul airliners and introducing four new aircraft if necessary. RJ will study the options before taking the decision concerning the choice of aircraft, to maintain its efficiency and reduce maintenance and operating costs. 

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