|Majali and the riddle of the region's skies
|President of Royal Jordanian Airlines pushes for greater economic integration in the Middle East
Business in person
The Middle East is full of perils and promise for the enterprising business executive, especially one who seeks to promote greater trade, travel and cooperation across the region's many contentious borders.
For the past 26 years, Royal Jordanian Airlines (RJA) executive Samer A. Majali has grappled with this riddle. Since becoming RJA's president and chief executive office four years ago, he believes he and his colleagues have identified a strategy that builds on the region's vast potential and minimizes its many constraints, especially the sharp decline in travel due to regional conflicts.
Having returned to profitability and also shed government subsidies, the airline is simultaneously looking to consolidate its long-haul routes, expand its regional network in the Middle East, privatize, join a global airline alliance, meet the rising competition of start-up low-cost carriers, and push for open skies and greater economic integration in the Middle East.
If this is an ambitious agenda, it's one that Majali seems to have prepared for since his university days in the United Kingdom a quarter of a century ago. He obtained bachelors and masters degrees, respectively, in aeronautical engineering and air transport management from Loughborough University and the Cranfield Institute of Technology.
"One of the fundamental issues in this region is how to raise the level of economic cooperation to improve living standards, and also as a prelude to more political cooperation. We need to get people to talk to each other and interact more, through trade, tourism, and other means, on the basis of their common language, history, and interests, to move forward on a pan-Arab idea of regional economic cooperation."
He advocates a European model of integration based on competition rules and open borders within a common cultural base. Transport and access in general are basic elements in his vision, which requires an "open skies" policy that allows airlines to set their own routes and frequencies, in response to market demands
"Liberalization of air transport is starting to happen here, but not in the sequence it should. We are not building on a single Middle Eastern economic base and frame for development, with clear rules, enforceable laws, easy access, appropriate visa and security regulations, and clarity of thought on how to deal with subsidized and private carriers that compete in the same market. This hinders the development of open skies, which would open up the region to more flights, competition, a drop in fares and more movement of people and goods."
His airline enjoyed government subsidies for many years, but now operates on a commercial basis, as a prelude to privatization. RJA aims to take advantage of the movement toward a liberalized environment by building up its regional network.
"We aim to link Amman with every Arab capital city with at least one daily, direct, nonstop flight, if not more than one a day. We also plan to link secondary destinations in the Arab world and the Middle East, like Irbil, Alexandria, Aleppo, Ankara and other big cities that usually are not capital cities."
Governments are less restrictive in providing access to secondary destinations, he notes, and the demand for services will increase as the supply is brought on line. RJA expects to stimulate the demand by offering the services to secondary cities.
"Alexandria to Aleppo is 1.5 hours flying time, but that trip now can take up to two or three days by land and air combined. Laws don't allow me to connect them directly, but I can connect them through Amman with a convenient service. When the service is available at a fair price, people will use it."
The potential to generate new passengers is enormous, he says, in view of the fact that only 8 percent of Arabs have traveled outside their own country.
"Our basic strategy is to combine convenience with safety and quality of service, so that you can go today and come back tomorrow, or in the evening of the same day, if you need to make a quick trip in the region. Food, entertainment, and these sorts of things are relevant but secondary issues for most travelers, who choose their airline mostly on the basis of reliability, cost and convenience."
Majali's 26 years with RJA have given him the opportunity to work in every major department, including marketing, planning, information systems, operations, and passenger services. This has given him insights into the requirements of success from the corporate as well as the passenger's perspective. One policy consequence today is the introduction of smaller, more efficient planes that can operate higher frequency services at lower cost, in order to offer customers a more attractive mix of destinations, frequencies and prices.
"We're reintegrating the Middle Eastern regional network of Royal Wings into RJA again, so it becomes part of our international network. Royal Wings' mission will be redefined as our charter airline, using all economy planes."
He anticipates increased competition from low-cost carriers and start-ups, like Air Arabia, Al-Jazeera and MenaJet, once they overcome the hurdles of operating in the region against subsidized state-owned flag carriers.
"We know that people will still pay a premium of 20 or 30 percent for better service, or a different quality of service. The trick is to offer full service, different classes, meals on board, and flexibility of tickets, and also to lower your cost to remain competitive with the new low-cost carriers."
Majali has always been deeply involved with international aviation. He is a member of the board of governors of the International Air Transport Association (IATA)and the executive committee of the Arab Air Carriers Organization, and a fellow of the Royal Aeronautical Society of the U.K. His constant interaction with fellow chief executives of other airlines gives him plenty of opportunity to discuss different strategies for profitability.
RJA is profitable now without state subsidies, having made some $22 million net profit on turnover of half a billion dollars last year, carrying 1.7 million passengers. It aims to increase its profitability from the current 4 percent of turnover to 10 percent. One reason for optimism is its healthy mix of passenger types - about 30 percent tourism, another 30 percent business travelers, and the balance being ethnic-type traffic, students, and family visitors. This shelters it from drops in any one market, and also evens out the demand throughout the year.
"We're working to join one of the three global alliances - Skyteam, One World, and Star - before the end of this year," Majali said.
That would improve the firm's marketing reach and have a positive impact on its image as an airline whose service and reliability levels are compatible with the global carriers. That is a major element of RJA's strategy while it restarts its process of privatization.
"We froze the second stage of selling off 50 percent of the airline four years ago, and now we're relaunching this by appointing a financial adviser to evaluate the airline and see if we're in the right configuration to go to the market. We hope to have RJA sell a portion of its share in the first half of 2006, pending the financial adviser's recommendation on how much of the airline to sell."
Rami G. Khoury
The Daily Star