Royal Jordanian seeks merger amid unprecedented crisis

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Royal Jordanian
An Airbus A340-600 Royal Jordanian airplane. Photo - inuksuk via Deviantart.com

Royal Jordanian Airlines said in a surprise statement it would be forced to seek a merger with a larger carrier in order to survive fierce competition from local rivals, high fuel prices and an economic downturn.

The Amman-based flag carrier, founded in 1963 and one of the Middle East’s oldest airlines, said it has not entered into talks with any other airline at the moment but seeks concrete plans.

“We are looking and reviewing options and talking to airlines to see when the time is right for us to do something,” CEO Hussein Dabbas said in an interview with Bloomberg. “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,” he added.

International Air Transport Association said in a report last month that Royal Jordanian’s earnings are likely to drop 62% to $3bn this year. The airline, a member of the British Airways-led Oneworld alliance, suffered from a loss of JD57.9m ($82m) in 2011, compared with a JD9.6m year-earlier profit. Political unrest after the onset of Arab uprisings and fierce competition from Gulf-based rivals including Emirates, Etihad Airways and Qatar Airways have dented the prestigious airlines’ financial repute.

“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 in a telephone interview. “This is the trend of many airlines around the world now.”

Royal Jordanian became the first Middle Eastern airline in 2007 when it joined Oneworld, one of the top three global alliances that includes American Airlines.

Willie Walsh, CEO of International Consolidated Airlines Group, parent company of British Airways, said mergers will most likely happen between existing alliance partners as they eagerly seek measures to expand and survive tough market conditions.

Dabbas did not mention if a transaction involving another Oneworld alliance member was on cards.

Source: Bloomberg

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