Royal Jordanian's IPO set to soar

The Jordanian government will therefore hang on to a sizeable holding in RJ and it is thought it intends to retain the right of veto at the company's general assembly. A total of 59.9 million shares are up for sale at an offer price ranging between JD2.75 and JD3.4 ($4.8) per share. Samer Majali, the airline's President and CEO, has previously emphasised that Jordanians will hold no less than 51 per cent of RJ's shares after the privatisation process.

Time-consuming process

The decision to sell off the majority of RJ's stock was taken in late 1998 and a restructuring and privatisation programme was then instigated. The carrier was transformed into a public shareholding company in February 2001 in preparation for the eventual sale.

Majali told the Petra News Agency that an initial plan of seeking a strategic partner for the carrier had been dropped as there was no longer any need for one, with RJ now being a successful entity in its own right, and the decision had subsequently been taken to float on the Amman Stock Exchange.

The government is not only keen for RJ to remain under the majority ownership of Jordanians but it also wants no changes to the carrier's public identity. The airline will of course remain the national airline and it will keep both its name and its base in Amman.

The IPO could generate up to $287.5m and it is hoped the entire process will have been completed by the middle of December. The share sale has, unsurprisingly, been heavily marketed across the Gulf, as well as in Europe, as large amounts of foreign direct investment has flooded into the kingdom from the likes from Kuwait and Saudi Arabia in the past couple of years.

Attractive to buyers and flyers

Indeed, the Jordanian government shouldn't really have too many concerns about RJ's share sale generating a healthy amount of interest.

The airline's performance over the past year has indicated a company most definitely headed in an upward direction. In October, RJ experienced a 40 per cent jump in passenger numbers, with more than 200,000 being carried as opposed to 145,000 in the same month last year. Load factors broke through the 70 per cent barrier, which is very respectable, while the number of departures and flying hours both saw gains of more than 20 per cent.

In August, RJ transported 256,000 passengers, the highest amount recorded in a single month in the carrier's 43 year history. With the airline joining the oneworld alliance in April, which counts the likes of British Airways and American Airlines among its members, the prospect for even fuller planes in the future seems very likely.

RJ has also embarked on a steady aircraft acquisition programme as it looks to expand and upgrade its fleet. While the recent Dubai Air Show was dominated by spectacularly large orders by Emirates and Dubai Aerospace Enterprise, RJ also took the chance to firm up two orders for Boeing 787 Dreamliners at a cost of around $320m and also agreed a leasing deal for two more from CIT Aerospace.

Earlier this year, Samer Majai said RJ would look to obtain a total of 12 787s via direct purchase and leasing agreements and the first planes should arrive in 2010. Some of the Boeing aircraft will be used to replace the airline's Airbus 310s which will commence phasing out in 2011.

The Jordanian carrier is also in the process of receiving an order of seven jets from Brazil's Embraer - four have been delivered thus far - while last year RJ received six new planes from Airbus' A320 family.

With an increased fleet, RJ can look to ramp up its global network and early next year, it will commence three flights a week to Hong Kong via Bangkok, marking the carrier's 55th destination worldwide. The decision comes as a direct result of joining the oneworld alliance which counts Cathay Pacific, Hong Kong's flag carrier, as a member.

Sky's the limit

Jordan's government has been undertaking a wide-ranging privatisation programme in recent years with companies such as Jordan Telecom and the Central Electricity Generating Company going under the hammer. In addition, the expansion and subsequent management of Queen Alia International Airport has been farmed out to a consortium called the Airport International Group, and led by Aeroports de Paris Management, on a 25 year operating contract worth $700m.

But some might say RJ is perhaps the jewel in the privatisation crown. The carrier's revenue rose by eight per cent last year as its profitability gradually increases and Jordan's tourism sector is also seeing steady growth with visitor numbers up by almost 14 per cent in the first six months of 2007, thus helping to boost RJ's load factor. For Arab investors often prepared to flirt with some high-risk investments, RJ's shares look a very safe bet indeed.

See also:

Jordanian Cargo targets expansion
Jordan's transport infrastructure set for an upgrade