The challenges facing Royal Jordanian

Salameh daraawi
Salameh Darawi (Photo: JNews)
The COVID-19 pandemic has exacerbated Royal Jordanian’s (RJ) woes, despite the fact that the company had almost caught its breath in 2019 when it made profits exceeding JD10 million for the first time in a decade. اضافة اعلان

In 2020, RJ had reverted to incurring losses after its preliminary budget recorded losses of over JD150 million. The company, which is considered the Kingdom’s primary national carrier, suffered these losses for a number of reasons, the most important of which was the adverse effects of COVID-19 on the aviation industry, particularly the almost complete halt in flights to RJ’s 45 global destinations, for over three months.  

The pandemic also temporarily ceased activities at airports, including Queen Alia International Airport, which in turn curbed all RJ activities by around 75 percent. There was also no reduction in RJ’s operating expenses, estimated at around JD12 million, comprising salaries, social security fees, and aircraft leasing costs.

Even though fuel alone constitutes more than 30 percent of RJ’s high operating expenses, the national carrier has not taken advantage of the 60 percent drop in international oil prices last year, following the complete halt in air travel in Q2 2020.

The issue is not limited to operating costs. There is an army of staff that work at RJ whose number, experts and studies agree, exceeds the carrier’s actual needs by double. Some studies have noted that RJ only needs around 800–1,200 of its 3,600 employees.

The third challenge is twofold. First, is the company’s poor capital and second is aircraft rental expenses, some of which climb to around $1.2 million per month. This issue requires reevaluation given the challenges that the global aviation industry has faced, especially post-COVID-19.

Last week, the government decided to change most of RJ’s board members as the majority shareholder in the company (80 percent of shares). Prominent businessman Saeed Darwazeh has a vision for the national carrier’s recovery and has the shareholder’s trust.

The new board of directors was assembled to face the pandemic’s repercussions with a new action plan implemented by the new administration, which will see the return of aviation expert and son of RJ’s former president, Samer Al-Majali, to manage the company under the blessing and full support of its new board.

The national carrier needs to address chronic structural issues, most notably by tackling the administrative costs currently stretching its budget, and fulfilling the need for staff with international technical and operating expertise.

Then comes setting up aircraft rental contracts that would reduce costs, fostering alliances with counterparts, and forging regional and international regional coalitions to expand the number of destinations, fulfilling RJ’s full potential and maximizing the advantages that result from any of such alliances.