Royal Jordanian losses mount due to conflict

Reuters/Jehad Shelbak

• $11m loss due to be repeated
• High yield traffic vanishes
• Visitor numbers down 7%

Royal Jordanian is likely to record a loss of $11 million for the second year running, due to a sharp drop in passengers because of the Middle East conflict.

The airline was expected last year to report its first profits since the Covid pandemic, and boasted a $15 million surplus in the first nine months of 2023. A profit of up to $20 million was forecast for the end-of-year results.

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However, after the October 7 attacks last year in Israel by Hamas and the subsequent conflict, Samir Majali, vice-chairman of the board and CEO of Royal Jordanian, said everything was turned “upside down”.

“The traffic just disappeared,” Majali told AGBI at the Bahrain Airshow.

Instead of a profit, the company made a loss of $11 million last year. And Majali predicted a similar deficit for 2024.

“We will also be making a loss this year, but hopefully in the same area of magnitude,” he said.

Jordan shares a border with Palestine and Israel, which, Majali said, has had a major impact. “People associate Jordan with the conflict, even though we have nothing to do with it.”

He said the company has lost the “high yield” traffic into Jordan and has relied instead on transit traffic through the country’s Queen Alia International Airport.

While load factors – a metric used to assess the efficiency of an airline in filling seats and generating revenues – have increased, overall passenger yields, which measure the average fare paid per passenger mile, are down by at least 10 percent.

“Instead of bringing the high-yield inbound traffic into Jordan, we’re actually carrying transit traffic through Jordan, which is less fickle but lower yield,” Majali said.

Figures released by Jordan’s tourism ministry showed a 7 percent fall in the number of visitors to the country in the first eight months of this year compared with the same period last year.

Flights have also been diverted to avoid Israeli airspace, going over Egypt on routes into Europe instead, which adds an extra half hour flying time in each direction and incurs between 5 and 10 percent extra costs.

Royal Jordanian received $100 million in emergency funding from the government, which owns 95 percent of shares in the carrier, during the Covid crisis, when its fleet was grounded for almost 18 months.

Majali said that should the conflict continue into next year, “then we’ll have to go back to the government.”

Nevertheless, the company is still continuing its fleet renewal programme at pace. Royal Jordanian has five Embraer E195-E2s in service, with a further three to arrive. It is also scheduled to start receiving the first of 16 new Airbus aircraft in January.

Two Boeing 787-9s will be delivered by the end of next year, although further 787s on order will not arrive for at least another eight months.

The airline should have had half of the new fleet this year, Majali said, but all deliveries from Airbus and Boeing were delayed.