Release Date: 14 November 2008
Release ID: 1072
Royal Jordanian Board of Directors, chaired by Vice Chairman Faris Sharaf, approved in its Oct. 29, 2008, session the financial results of the company for the nine months, ended in September 2008. According to these results, RJ realized a gross profit of JD24 million and incurred a net loss of about JD2 million.
Sharaf said that these results were achieved despite the soaring jet fuel prices internationally, which made the company pay a much higher fuel bill this year, amounting to JD221 million, a 92% increase over last year's bill.
He praised the efforts exerted by the company's management to increase revenues and the number of passengers, and to improve the operational indicators through adopting a clear and focused strategy to face the challenges of the economic crisis in a highly professional manner.
RJ President/CEO Samer Majali pointed out that the company registered a large increase in the operational revenues, which amounted to JD533 million, a 34% increase over the same period of last year.
This increase resulted from an 18% growth in the number of passengers, which reached 2 million this year, an increased seat factor, from 71% to 73%, and a 14% increase in passenger yield, mainly due to the increase of prices of tickets to partially offset the increase in jet fuel prices.
Majali added that the air freight revenues grew by 20% in comparison to last year's first nine months, to reach JD32 million, as a result of an 18% growth in the uplifted cargo, in addition to a 12% increase in cargo yield. This growth was generated in spite of the sharp competition from air and marine shipping companies, and of the increase in jet fuel prices.
Majali said that the marginal net losses that RJ incurred are basically attributed to the losses in hedged fuel deals that RJ procured throughout this year in conformity with the best international practices in this regard. Through this policy, RJ aims to protect its financial position and reduce its financial volatility. Thus, the airline contracted to purchase hedged fuel for about a third of its annual consumption during 2008 and 2009, which is a balanced and cautious strategy to mitigate the effects of the increased jet fuel prices on the airline’s financial results.
He added that as a requirement of the International Accounting Standards, RJ re-evaluated its fuel hedging deals at the end of the third quarter of this year, and due to the dramatic and unexpected reduction of oil prices that resulted from the international economic crisis, which reached $60 a barrel in comparison to $147 a barrel last July. The company registered JD17 million unrealized losses, leading to the aforementioned marginal loss. Majali pointed that these unrealized losses are bound to fluctuate with the price of jet fuel.
The airline recorded unrealized profits of JD5.6 million last June, resulting from reevaluating the fuel hedging deals at the end of that month, when the fuel prices were very high.
In addition, the airline assets went up to JD383 million as of September 30, 2008, from JD326 million at the end of 2007, mainly due to the purchase of two Embraer 175 aircraft in May and June this year, at a cost of JD42 million, through a capital lease deal that was arranged last year. The deal also included two Embraer 195 aircraft delivered in the last quarter of 2007.
Majali expressed optimism about the results of the last quarter of this year, mainly because of the big decrease in jet fuel prices. He also thanked the prime minister for the decision to shortening the period of adjusting oil prices in the Kingdom rather than wait for the end of each month to do so. This will boost RJ's performance in the coming period.
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