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Sat 29 Mar 2008 11:33 AM

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Royal Jordanian sees higher profit in '08

Earnings driven by robust passenger traffic in Middle East despite higher fuel prices, airline says.

Royal Jordanian (RJ), the first Arab state carrier to be privatised, said on Friday it saw higher 2008 profit, driven by robust passenger traffic in the Middle East despite higher fuel prices.

Nasser Lozi, chairman of the RJ board of directors, said 2007 net profit rose 22% to 20.4 million dinars ($28.7 million) against the previous year with a "favourable outlook" for 2008 from growing passenger traffic.

"We expect to improve on last year's healthy performance," Lozi said, adding that passenger traffic rose 22% in February 2008 against the previous year.

Total passengers transported rose 18% in 2007 to 2.4 million passengers against the previous year.

RJ held its first annual general meeting (AGM) on Thursday since its privatisation last December when the government sold 71% of the airline to international and local investors in an initial public offering (IPO).

Foreign investors, including the Beirut-based investment firm controlled by the Mikati family which acquired a 19% shareholding, now own at least 40% of the carrier's total 84.3 million dinars capital.

Local investors, including the government which still retains a 29% stake, have a majority shareholding that exceeds 51% to ensure the carrier maintains its right to fly under bilateral accords.

Lozi said RJ's operational revenues rose 21.5% to 543 million dinars in 2007 while gross profit rose to 33 million dinars in 2007 against 13 million in 2006.

Samer Majali, deputy chairman and CEO of RJ, told newswire Reuters the carrier's main challenge in 2008 was to offset the impact of higher fuel prices that now constituted around 40% of total expenses. Normally it is around a third.

"Our main effort will be to try to absorb the increase in fuel prices through more efficient operations and increasing the revenue by more passengers..," Majali said, adding the carrier had hedged an undisclosed percentage of its fuel needs for this year.

Energy importers like Jordan have been hit by a five-fold increase in oil prices during the last six years.

Majali said RJ was able to expand its network of 55 directly served destinations to 700 as the only Arab airline in the international airline One World Alliance that also includes British Airways, American Airlines and Australia's Qantas.

The airline's strategy was to create Amman as a regional hub for the Levant region by expanding its regional network and tap booming air passenger demand in the Middle East and the Gulf.

RJ's fleet modernisation will allow it to bring into service by end of 2008 10 new A320, A321 and A319 planes.

Majali said RJ is the first Arab carrier to introduce eight Boeing 787 planes for its medium- to long-range routes by 2010. (Reuters)

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