Royal Jordanian holds its ordinary Annual General Meeting

Attending were members of the board of directors, RJ President/CEO Captain Suleiman Obeidat, the companies’ deputy general comptroller, RJ accounts auditors Ernst and Young and some shareholders; the latter, in their entirety, own 88% of the company capital, which amounts to 146.4 million dinars/ shares.

The ordinary meeting discussed the board’s report on the 2016 financial situation and the business plan for 2017, in addition to the auditors’ report, the budget, profits and losses. The ordinary general assembly agreed to all the articles under discussion.

Biltaji highlighted the RJ position as the national carrier of Jordan that contributes to the kingdom's progress as one of the economic pillars of the nation. It has been the cornerstone of Jordan’s air transport industry, which enjoys regional and international reputation due to its dependable air operations, competent and well-trained Jordanian manpower, and a modern fleet that serves an extensive network of destinations spanning four continents.

Royal Jordanian directly contributes about 3% to the Gross Domestic Product of the kingdom, exceeding the contributions of other well-established economic sectors. 

He said that the observer of RJ's journey in the past ten years and the challenges would realize that RJ is not alone in facing hurdles; it is a situation shared by all self-reliant companies in the world due to the sensitivity of the air transport industry and its vulnerability to economic, political, security, societal, and even health and environmental variables. He mentioned that any kind of work needs to have three main factors to be successful, a good base, open and innovative mentality and opportunities.

He added that over the past few years, several circumstances and challenges affected RJ's resources and results, as well as its ability to attain the profitability desired by the shareholders and its management.

In parallel, new challenges appeared in 2016, like the currency exchange rates that affected last year's results, in addition to the steep competition presented by the big carriers in the region.

He said that RJ is keen on implementing the government’s vision for RJ in the coming period, particularly after the directives the Prime Minister gave during his visit to RJ accompanied by the government's economic team last week.

Discussed were several topics, among which the need to encourage tourism in the kingdom, and finding new, promising markets in cooperation with the Jordan Tourism Board and the Aqaba Special Economic Zone and other parties.

He pointed out that RJ will work with different ministries and government departments to find solutions to the faced challenges and to invest in developing the RJ-owned Royal Wings and Royal Tours. This presents a great potential for RJ, in light of the tourism and investment capabilities, particularly in Aqaba, Petra and Wadi Rum.

Biltaji added that RJ transported 3 million passengers in 2016, 80% of them either departing or visiting Jordan, thus being a driving force for the economic, tourism, investment and commercial activity in the Jordanian market.

He said that RJ will review ways to benefit more from its contribution to other companies, like Dnata Catering Company, Jordan Aircraft Maintenance Company (JorAMCo), Jordan Airline Training and Simulation (JATS) and others.

Biltaji stressed that Royal Jordanian is a long-established company and a national icon that plays a pivotal role in connecting Jordan to the world.

He pointed out that the company's board of directors is currently reviewing five axes of great importance and direct link to Royal Jordanian: people, product, plans, perception and performance.

He also praised the reputation and bright image of RJ among Jordanians, due to its qualified human resources, modern technology and fleet, wide route network and its significant economic impact on the Jordanian aviation sector.

Biltaji answered questions by the shareholders concerning aircraft leasing/purchasing. He explained that Royal Jordanian contracts with the largest aircraft leasing companies in the world and that the rent is determined according to the size of the contract and the market conditions at the time of contracting. He added that the highest supervisory authorities in Jordan has looked into the company's procedures in this area. Biltaji said that the airline deals with full responsibility, transparency and openness in this issue in front of the supervisory authorities in the kingdom.  

The legal and financial experts at the company explained the mechanism of the aircraft financing, which is carried out through special purpose companies. Structuring leasing through special purpose companies is not only a globally accepted procedure, but is also a requirement by the financing banks and is a structure which is known and published by financiers.

The specialists also explained the purpose of the banks' requirement to structure financing through special purpose companies where the latter act as trustees holding legal title to the aircraft. They also listed the names of the leasing companies that RJ contracts with, either under capital or operational lease. They indicated that the historically weak capital of Royal Jordanian has curtailed the airline ability to purchase and finance a larger number of aircraft.

In his speech, which was distributed to the shareholders, Chairman of the Board Said Darwazeh, said that the 2016 results did not conform with those sought by the Royal Jordanian management, its employees and shareholders.

He said that the main reason that led to incurring a net loss of JD24.6 million refers to the provision for currency devaluation of the Sudanese Pound and the Egyptian Pound of JD19.5 million, due to the decision taken by the Sudanese government to impose incentive fees on currency transfers outside Sudan and the decision of the Egyptian government to float the Egyptian Pound during 2016, in addition to provision of JD3.5 million in compensation of voluntary staff release.

He added that another factor that contributed to the decrease in last year revenues and increased the loss was the drop in ticket fares by 11%.

The operating revenues declined to JD598.3 million from JD658.1 million in 2015, because of the growing competition RJ faced in 2016 both from full-service airlines and low-cost carriers.

He stressed that although RJ's operating revenues fell by 9%, Royal Jordanian decreased its operating costs by 6%, from JD559.1 million in 2015 to JD527.7 million in 2016, which helped it attain a JD5 million net operating profit, compared to JD29.6 million in 2015. The gross profit reached JD70.6 million in 2016 compared to JD98.9 million in 2015, a decline of 29%.

Darwazeh said that despite the decline in revenues, the net operating profit recorded by the company in 2016 remains an indication of RJ's ability to maintain its competitive position and its share in the local, regional and global markets.

It offers high-level services to passengers, boasts a modern and young fleet of aircraft, and a wide network that the company continuously works to strengthen, to boost connectivity.

He added that we take pride in our company's competitive position since RJ operates a modern and young fleet of aircraft -- of an average age of five years, young by any standard.

The entry of seven newly manufactured 787 Dreamliners is an important factor that helps RJ offer even more competitive services. At the end of 2016 and the beginning of 2017, the sixth and seventh aircraft of this type entered on a capital lease basis that ends with ownership of these aircraft. The first five aircraft of the same model entered on an operational lease basis.

He mentioned that in 2016, RJ implemented the decision of its general assembly, taken in May 2015, which stipulated a restructuring of the RJ capital, reducing it from JD84.4 million to JD46.4 million, after which the capital will be increased by JD200 million shares/dinars, making the authorized share capital JD246.4 million shares/dinars.

As a result, the capital was reduced and the authorized share capital was increased. The company then increased the subscribed and paid capital over two phases, the first phase of which was accomplished.

The second phase includes increasing the capital by JD100 million shares/dinars. It is expected to start the public offering of this phase in the second half of 2017 and conclude it in 2018.

Darwazeh said that RJ is proud of His Majesty King Abdullah’s wise leadership, and praised the government’s support and keenness to reposition this national company in a place befitting its position as the national carrier.

He also thanked the shareholders for their support and understanding of the situation the company has been going through during the past years.

He expressed appreciation to RJ’s staff and to its loyal passengers, saying that RJ will always be a national icon that supports the economy of Jordan.

During the meeting, Biltaji and the President/CEO Captain Suleiman Obeidat responded to the shareholders’ questions about the airline’s performance and plans.

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