Leading by example

Last month we discussed the problems associated with governments getting in the way of its national airlines by owning them outright.

  • E-Mail
By  Barbara Cockburn Published  December 19, 2006

|~||~||~|Last month we discussed the problems associated with governments getting in the way of its national airlines by owning them outright. What does a government want with running an airline anyway? I focused on Kuwait Airways Corporation last month because it hosted the Arab Air Carriers Organisation’s annual general meeting in Kuwait in November last year and the chairman and managing director Sheikh Talal Al Mubarak Al Sabah, talked freely and openly about how he felt stifled in his position because, while the airline is government-owned, it receives no subsidies, leaving the commercially-run entity, no option but to run at a loss. How sustainable is that position? Royal Jordanian is strides ahead of its fellow Arab carrier because the Jordanian government is considering which international investment bank will be its consultant to prepare a comprehensive report on the best way of privatising the airline and appraise its transport rights, fleet, manpower, offices and others assets. It is soon to announce its favoured international bank and it will depend on its technical and legal proficiency and the international experience. It received offers from Merrill Lynch, Citibank, Goldman Sachs but at the time of going to press, the announcement was not made. Samer Majali, the airline’s vice chairman, president and CEO, explained that in the 1990s the airline had accumulated losses to the tune of US$600 million. At the time the government wanted to privatise all of the large commercial institutions, but due to the Gulf War, it had to go through financial restructuring before it could take advantage of being a private company. The financial restructuring of RJ was completed in 1999 and 2000 and involved reducing its employee numbers. This allowed RJ to begin privatisation. It was transferred from a public utility into a public shareholding company in Feb 2001. The next phase of the privatisation process was delayed due to the terrorist attacks of 9/11 as well as other international and regional disputes but now it is about to appoint a consultant to review the airline’s finances to see what portion for will be set aside for financial investors, what portion to for IPO. But the government will retain 26%. A portion may also be given to employees in share options. Many aviation experts in Europe think of the Middle East carriers as backward for this very reason, and this is in spite of the enormous wealth and expansion plans to cater to the growth of the region’s aviation industry. But Royal Jordanian is embarking on setting the record straight - that airlines can grow and flourish away from the clutches of government and can set itself among the rest of the world’s world class carriers. This will be evident in the first quarter of the year when it becomes the first airline in the region to join an alliance. It will immediately increase its network upon joining the Oneworld Alliance and can link up to its peer’s IT systems such as revenue accounting, revenue management systems, frequent flyer programmes, e-ticketing and interlining. The possibilities are boundless. Take note, Kuwait. ||**||

Add a Comment

Your display name This field is mandatory

Your e-mail address This field is mandatory (Your e-mail address won't be published)

Security code