Royal Jordanian To Renew Narrowbody Fleet

 - August 30, 2019, 7:19 AM
Royal Jordanian Airbus 319.

Levant-based airline Royal Jordanian is targeting a board meeting in September to make a final decision on three different fleet-renewal options that should see its entire narrowbody fleet replaced, and bring the complement up from 26 aircraft today to 29 in 2022.

“We are going to have six owned aircraft and the rest leased,” Royal Jordanian CEO, Stefan Pichler, told AIN. “If we decide on this fleet-renewal program [in] September, then I think that we’ll have the first new aircraft in the second quarter of 2020, in a process that will run until 2026.”

He said the airline had a “pretty good 2018,” meaning enhanced revenue performance, and continues on a road to success, embarked on in June 2017, when he joined.

In the first half of 2019, the airline reported “significantly improved” gross profits and net operating profits, a result of Pichler’s turnaround plan. Operating revenues rose 1.4 percent to JOD316 million ($446 million), while load factor was up marginally to 73.1 percent. As a conservative economy with no access to hydrocarbon reserves, Jordan sees even the smallest improvements as signs of progress.

“In 2018, we faced some headwinds because of the fuel price. The revenue performance of Royal Jordanian in 2018 was an increase in unit revenues of 6 percent. At the same time, we decreased unit costs by 4 percent, excluding fuel. [This] means we enhanced the efficiency of the company’s organization by 10 percent.“

Comparisons with other Middle East airlines are invidious due to different operating models. “If you run an airline as part of your government, then it contributes to its agenda,” he said. “If you run a company like ours, which is stock-listed and where the government has no substantial money to invest, then you need to be profitable. We run a business. We don’t run a public-service entity, which means you look at the bottom line. If you look around us, many of the players are run as part of the government’s agenda. They have a different set of objectives. I’m used to running airlines as businesses.”

The German has stints in leadership positions at Lufthansa, Australia’s Virgin Blue, Kuwait’s Jazeera Airways, Fiji Airways, and Air Berlin.

Royal Jordanian’s fleet includes seven Boeing 787s and 19 other aircraft—all of which need replacing—including the A320 family, and Embraer E-175s and -195s. “We are just finishing up a fleet rollover project,” he said. “We want to replace our whole narrowbody fleet, all the Airbuses and Embraers. We have been running [a] beauty contest with all four contestant OEMs: Embraer, Bombardier, Airbus, and Boeing. We started that more than a year ago, with these four and two engine suppliers.

“We use the Embraers to some of the smaller destinations such as Saudi Arabia or Aqaba. We don’t usually fly them to Europe. We also try to avoid using them to Dubai or Abu Dhabi. Normally, we fly them to Cairo, Saudi Arabia, Iraq, and domestically.”

Average fleet age today is 7.8 years. The danger of the airline’s varying aircraft types was "overcapacitizing" some of the smaller markets, he said. “[Erbil, Iraq, is a case in point], where you [can] offer too many seats. We are looking at that. We are now in final discussions, with a shortlist of options. Hopefully, [next month] this will happen, and we know where we go.”

Royal Jordanian flies to 50 destinations: the U.S., Canada, and Kuala Lumpur, Hong Kong, and Bangkok. These also include 18 destinations in Europe, with the rest to the Levant and Africa.

“We want to be the home player for the Levant, which has significant implications,” he said. “We don’t have any very strong competitor in this region, whether from Syria or Iran. We decided to connect the Levant via Amman to Europe, the U.S., and Asia. That’s our strategic position. We know we can’t compete in the Gulf.

“Our market share at [hub Queen Alia International Airport, Amman] is about 42 percent,” he said. “Of course, the Jordan market is a battlefield, between Turkish, Emirates, Etihad, and Qatar Airways for the long-haul passengers to the places we don’t fly, to India, the U.S., and the Far East.

“In the last two and a half years, we have completely restructured our schedule, because we wanted to have more connecting passengers. We have to make sure that people from Baghdad via Amman go to New York. We had to reconstruct our hub to give people low waiting times. [Last year], there were 42 percent more flights connecting within two hours.”

He would like to see a Royal Jordanian-only terminal at Queen Alia. “We have asked the airport authorities to investigate the feasibility of creating a dedicated terminal at Queen Alia. It would create a much better customer perception, and then we could also enhance connectivity and service.”