Leading by example

Last month we discussed the problems associated with governments getting in the way of its national airlines by owning them outright. What does a government want with running an airline anyway? I focused on Kuwait Airways Corporation last month because it hosted the Arab Air Carriers Organisation’s annual general meeting in Kuwait in November last year and the chairman and managing director Sheikh Talal Al Mubarak Al Sabah, talked freely and openly about how he felt stifled in his position because, while the airline is government-owned, it receives no subsidies, leaving the commercially-run entity, no option but to run at a loss. How sustainable is that position?

Royal Jordanian is strides ahead because the government is considering which international investment bank will be its consultant to prepare the airline for the next stage of privatisation by producing a comprehensive report on its transport rights, fleet, manpower, offices and others assets. It received offers from Merrill Lynch, Citibank, Goldman Sachs, but at the time of going to press, the announcement was not made.

Samer Majali, the airline’s vice chairman, president and CEO, explained that in the 1990s the airline had accumulated losses to the tune of US$600 million.

At the time the government wanted to privatise all of the large commercial institutions, but due to the Gulf War, it had to go through financial restructuring before it could take advantage of being a private company.

The financial restructuring of RJ was completed in 1999 and 2000 and involved reducing its employee numbers. This allowed RJ to begin privatisation. It was transferred from a public utility into a public shareholding company in February 2001. The next phase of the privatisation process was delayed due to the terrorist attacks of 9/11 as well as other disputes at the time.

Many aviation experts in Europe think of the Middle East carriers as backward in spite of the enormous expansion plans to cater to the growth of the region’s aviation industry.

Royal Jordanian will soon show that airlines can flourish away from the government. This will be evident in the first quarter when it becomes the first airline in the region to join an alliance. It will immediately increase its network upon joining the Oneworld Alliance and can link up to its peer’s IT systems such as revenue accounting, revenue management systems, frequent flyer programmes, e-ticketing and interlining.

The possibilities are boundless. Take note, Kuwait.

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