Carrier says merger with larger rival is likely due to high prices, competition
Royal Jordanian Airlines, a member of the British Airways-led Oneworld alliance, said a merger with a larger carrier is inevitable as high fuel prices, competition from local rivals and a sluggish economy squeeze earnings.
While Amman-based Royal Jordanian, founded in 1963 and one of the Middle East’s oldest airlines, has no concrete plans for a transaction, it views consolidation as “a must,” CEO Hussein Dabbas said in an interview.
“We are looking and reviewing options and talking to airlines to see when the time is right for us to do something,” Dabbas said yesterday. “With the pressure we are seeing from mega-carriers around the world, whether European or regional, to continue as we are is going to be a difficult game to follow.”
Airline earnings will likely drop 62 percent to US$3bn this year, equal to a 0.5 percent margin, the International Air Transport Association said last month. Royal Jordanian had a loss of JRD57.9m (US$82m) in 2011, versus a JRD9.6m year-earlier profit, as traffic was hurt by political unrest in the region and competition from Gulf-based rivals including Emirates, Etihad Airways and Qatar Airways.
“It’s a very difficult business environment and if airlines can find the right synergies, they should look at merging their operations and consolidating,” Dabbas said by telephone. “This is the trend of many airlines around the world now.”
Royal Jordanian joined Oneworld, which includes AMR Corp.’s American Airlines, in 2007, becoming the first Middle Eastern recruit to one of the three global groupings.
Willie Walsh, CEO of International Consolidated Airlines Group, the parent of British Airways, has said he’s eager to expand the company and that mergers will most likely happen between existing alliance partners.
Dabbas didn’t say if a transaction involving another Oneworld member was most likely.For all the latest transport news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.