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POLITICAL HOTBED: RJ staff are used to international disputes, having worked through several recent conflicts.

Despite operating amid political instability, Royal Jordanian Airlines generated healthy revenues last year. President Samer Majali talks to Rob Morris about the highs and lows since taking control.

It's been nearly seven years since Samer Majali took over Royal Jordanian Airlines, but the seasoned aviation figure still vividly recalls his arduous introduction.

Having accepted the president role in July 2001, Majali was forced to steer the company through the post 9/11 fallout two months later. The ordeal was a tough initiation for the newly installed chief, with the aviation industry crashing amid an economic downturn.

The timing was bad and I thought that when the attacks occurred," Majali says. "But there was a job that needed to be done and you have to do the best you can under the circumstances." Despite the downturn, Royal Jordanian's operation remained steady.

Indeed, Majali and his management team had been negotiating a deal involving four Airbus A340s before the attacks. Talks continued following 9/11, with aircraft manufacturer Airbus forced to sell at cheaper rates to offset order cancellations from other carriers.

The new planes were eventually deployed on US routes, replacing Royal Jordanian's older A310s. "Sometimes you can turn a negative situation to your advantage," Majali says. "Securing the A340s improved our network and generated more revenue.

For Royal Jordanian's management and staff, operating amid turbulent market conditions is nothing new. In the late 1980s, the airline's revenues dropped when Jordan's currency plummeted. Political influences also took their toll, with the Gulf War destabilising the region's economy.

Both incidents hit Royal Jordanian hard, forcing management to restructure the airline and put privatisation plans on hold. To reduce debts, the airline's directors sold off non-core assets such as engineering and overhaul operations, duty free shops, training centres and catering facilities.

Management also made more than 800 redundancies between 2002 and 2005. Meanwhile, the board increased flight frequencies and invested in the latest IT systems and aircraft.

In the short-term, making cutbacks in some areas while strengthening others appeared to pay off. But management suffered further blows after the Millennium. Problems emerged after the government assumed 100% control prior to launching the airline's privatisation plans eight years ago.

Some 49% of shares were set aside for an outside investor that would work closely with Royal Jordanian's management. But the airline's directors were forced to abandon this strategy following 9/11. "The plans were delayed because the appetite to invest in airlines had vanished," Majali says.

"We were back on our own again and unable to carry out the privatisation, which was one of my tasks when I was appointed. The idea was to inject more value back into the airline, getting it in better shape after it had gone through the privatisation.

The airline endured further misery in 2003 when US armed forces invaded Iraq. During the conflict, passenger numbers on services operating to and from nearby Jordan initially dropped.

The upshot was that Royal Jordanian's finances dipped slightly, with the airline generating modest returns before the latest political dispute involving Lebanon and Israel in 2006.

It was yet another international crisis threatening to undermine the airline's development. But unlike 9/11 and the Iraqi war, Lebanon's conflict with Israel failed to perturb most travellers from boarding Royal Jordanian flights.

According to the carrier's 2007 annual report, Royal Jordanian generated JD24 million (US$33.8 million) profits before taxes - more than triple the JD6.1 million ($8.6 million) return in 2006.

Operational revenues also climbed during the same period, with Royal Jordanian generating JD543 million ($766.2 million) compared to JD447 million ($630.7 million) the previous year.

The airline's strong profit amid the political fallout was attributed to rising passenger demand. Installing the latest IT systems, such as electronic ticketing, internet booking, self service check-in and revenue management, were other contributing factors, according to the airline's management.

With the carrier on a stable financial footing before last year's profit hike, the board's privatisation plans were rekindled in 2006. The government appointed Citigroup in January 2007 as lead consultant to prepare Royal Jordanian for an IPO.

Some 11 months later, the Jordan-based carrier joined the Amman Stock Exchange, listing 59.9 million shares at JD2.75 to JD3.40 each. The admission represented 71% of the airline's shares, with the government retaining a 29% stake.

"Our timing for the admission was good because the global market had taken a beating between January and March this year, so we were lucky to complete the IPO before this happened," Majali says.

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