Despite losses, CEO says RJ will ‘continue to serve the nation’

Royal Jordanian President and CEO Samer Majali
Royal Jordanian President and CEO Samer Majali
AMMAN — As the COVID-19 pandemic hit and flights were grounded, airlines around the world faced huge losses. Royal Jordanian (RJ), the Kingdom’s national flag carrier, was no exception. اضافة اعلان

“RJ was effectively grounded for almost the entirety of 2020 while some other airlines continued,” Royal Jordanian President and CEO Samer Majali told Jordan News in an interview.

“Because the airline had some cost overhead that could not be dropped and no revenue, the airline lost JD161 million. That’s a considerable loss: of all of RJ’s accumulated losses, 75 percent of them came from last year.”

At that time, the airline had requested permission from the government to allow transit flights as they represent 60 percent of RJ’s traffic, Majali said. However, they were denied. When restrictions were eased in September, PCR testing regulations limited airport capacity and hence the number of flights per day. 

This crisis came right as the carrier posted an improvement in its net profits in 2019.

Currently, among the cost issues facing RJ are employee salaries. Even though there are cost reduction plans in place, the salaries are still a continuous expense that have to be paid, said Majali. Another issue is aircraft lease agreements.

“You can’t break these leasing contracts, return the airplanes, or reduce the cost due to COVID,” Majali said. “Negotiations with the leasing companies to reduce the burden are ongoing but are very difficult.”

The government of Jordan holds the largest share of the carrier. Initially they helped alleviate some of the financial burden by collecting funds that had been allocated to RJ but were not previously paid, he said.

“Due to COVID itself, the government is not able to inject any new cash,” Majali explained. “We’re still discussing with the government and trying very hard to find ways to alleviate and to mitigate the losses that we’ve had last year.” This includes solutions to improve RJ’s negative equity and cashflow problems.

Currently, there are no legal restrictions on flying and the airline is opening up whichever routes it sees as commercially feasible. However, there is still low demand for travel.

The first reason for this, explained Majali, is Jordan’s epidemiological status. Although it has slightly improved, Jordan was in the crux of its second wave earlier this year.

“This has not been conducive for people coming back to Jordan,” Majali said. “This is also preventing countries from opening up for people leaving Jordan, making it difficult to reengage.”

Another reason is the economic slowdown triggered by the pandemic. “People have less money to travel, especially for discretionary travel,” he said.

Majali, who was appointed as president and CEO of the airline on March 30 of this year, remains optimistic. While he explained that 2021 will be a loss-making year and the recovery will be slow, he believes that this summer will witness greater travel.

“In the next two months we expect a huge increase in the number of flights, all the way up to the end of the summer,” Majali said. “Jordan is an open destination and hopefully will remain so, and we think a lot of people will come for tourism, especially regional tourism, plus many Jordanians will be coming back home.”

Previously, Majali had presided over RJ as its CEO between 2001 and 2009. During that time, he worked to transform the airline, making it the first Arab flag carrier to join a global alliance and the first to be privatized.

Leading an airline company at a time of hardship is not unfamiliar to Majali. “When I was CEO the first time around, it was a very difficult regional situation,” he said. “A month after I was appointed, September 11 happened, and this was very dramatic on the aviation industry. This was followed by instability in the region — the Iraq War, the crash of 2008, the Arab Spring, and now COVID.”

Asked to assist RJ in its recovery from the pandemic, Majali returned with a new strategy.

Among the carrier’s main priorities is improving its image. While the carrier has faced issues outside of its control, including regional instability and the onset of the pandemic, there have also been issues within its control such as quality of service, he explained.    

“We need to make more investment in the quality of our product; the interiors of the airplanes, onboard services in terms of the entertainment and catering,” Majali said.

While Majali wants to concentrate on renewing the fleet, financial limitations and leases make it difficult to do so until at least 2023. “In the meantime, we want to improve the interiors of our current airplanes, our cabins, and our maintainability.”

Once the crisis subsides, RJ plans on resuming these projects and continuing to serve in its role as the strategic arm of the Kingdom, Majali said. He believes in the importance of making Jordan a hub to connect the region with the rest of the world.

“The airline is here to stay,” Majali said. “Hopefully it’ll continue to rebrand itself, regain its image and continue its service to the nation.”

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