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RJ blames currency drop and competition for disappointing financial results

Posted 1 May 2017 · Add Comment

Royal Jordanian shareholders have been told that the airline achieved a small operating profit in 2016 while registering an overall net loss as the Amman carrier reported concerns over competition from low cost and legacy carriers as well as currency devaluation in major markets.


Speaking at the annual general assembly in Amman, Board chairman, 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 $34.6 million refers to the provision for currency devaluation of the Sudanese Pound and the Egyptian Pound of $27.5 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 $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 $843 million from $927 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 $787 million in 2015 to $743 million in 2016, which helped it attain a $7 million net operating profit, compared to $41 million in 2015. The gross profit reached $99.5 million in 2016 compared to $139 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.
He said the entry into service of seven 787 Dreamliners was an important factor to enable 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.
RJ transported 3 million passengers in 2016, the chairman said.
 

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