Royal Jordanian Seeks Merger As Gulf Carriers Squeeze Profit

Manila Bulletin
April 10, 2012
By Tamara Walid (Bloomberg)

Royal Jordanian Airlines (RJAL), 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,” Chief Executive Officer 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 $3 billion this year, equal to a 0.5 percent margin, the International Air Transport Association said last month. Royal Jordanian had a loss of 57.9 million dinars ($82 million) in 2011, versus a 9.6 million dinar 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 Ltd.
‘Right Synergies’

“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 shares rose as much as 3.5 percent to 59 qirsh before trading at 57 qirsh on the Amman exchange.

The carrier joined Oneworld, which includes AMR Corp. (AMR1)’s American Airlines, in 2007, becoming the first Middle Eastern recruit to one of the three major global groupings.