Royal Jordanian has told its shareholders, who include the Jordanian government, that the carrier cannot survive the coronavirus crisis without state support, despite the airline having achieved profitability in 2019 for the first time in years.
The national carrier is in the midst of a turnaround plan led by CEO Stefan Pichler, who reduced the airline’s losses by hundreds of millions of dollars and brought it back to profitability prior to the Covid-19 pandemic.
But in the company’s annual general meeting with shareholders, Royal Jordanian’s chairman, Said Darwazeh, said the closing of Queen Alia International Airport in mid-March and the halting of all passenger flights had hit the carrier hard.
Darwazeh said the airline needs “direct and indirect” support from the government in order to overcome the crisis.
Revenues generated by airlines in the Jordanian market will fall by at least $700 million (52%) compared to 2019, according to the International Air Transport Association (IATA), which has backed Royal Jordanian’s calls for financial relief.
“The consequences for the Jordanian economy are severe,” said Muhammad Albakri, IATA’s regional VP for Africa and the Middle East, in a statement last month. “Urgent financial support from the government is needed now to keep the sector alive.”
Royal Jordanian incurred a JD25.5 million ($36 million) net loss in Q1 this year due to a 19% drop in passenger numbers and 22% decline in turnover.
Pichler warned that the impact of Covid-19 will be felt even stronger in Q2 2020 and subsequent months.
“Even if the company resumes partial and gradual operations, one can expect a sharp decrease in the demand for travel regionally and globally,” said Pichler.
Pichler has turned several high profile airlines around in his career, including Thomas Cook AG, Virgin Australia, Fiji Airways and Jazeera Airways, and was on-track to return Royal Jordanian back to “desired profitability”.
Last year, the airline achieved JD10.4 million ($14.7 million) net profits after tax, compared to a JD5.9 million ($8.5 million) net loss in 2018. Operating profits increased 174% between 2018 and 2019 thanks to a low-cost, high-revenue strategy that combined the best elements of the budget and legacy models.
Pichler believes the airline deserves financial help from the government because of its return to profitability and for hitting KPIs in the last two years, which he said was “unprecedented in the company’s history”.
He said: “The positive financial results of the company were obtained through the efforts exerted by all employees who worked together to implement the pillars of the turnaround plan…and make them a reality despite the fierce competition from low-cost airlines that have been operating regular flights to Amman and Aqaba for more than a year now.”
Pichler said the Royal Jordanian “would not be spared” from the impact of Covid-19 on the global air transport industry.
“It will be directly and negatively affected by the outbreak of this disease this year and in the following years, due to the complete stop of operations for a long period of time and to the strict restrictions imposed in Jordan and globally,” he said.