Annual Report Content
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Annual Report Content Our Vision, Mission and Values 8 Members of the Board 9 A Word from the Chairman 10 Board of Directors' Report 16 Executive Management 21 Corporate Structure 24 Risks to the Company 30 Company Achievements during 2016 34 Donations and Grants during 2016 42 Independent Auditor’s Report 52 Consolidated Statement of Financial Position 58 Consolidated Income Statement 59 Consolidated Statement of Changes in Equity 60 Consolidated Statement of Cash Flow 61 Notes to the Consolidated Statements 62 1 His Majesty King Abdullah Bin Al Hussein 2 3 His Royal Highness Prince Hussein bin Abdullah 4 5 Sketching our Dreams Our Vision, Mission and Values 8 Members of the Board 9 A Word from the Chairman 10 6 7 Vision: To be the airline of choice, connecting Jordan and the Levant to the Board of Directors Our world. H.E. Said Sameeh Darwazeh Mission: Chairman of the Board, representing Government Shareholdings’ To ensure our customers always recommend our airline Management Company (from 20 June 2016). Vision, because we consistently provide: H.E. Suleiman al-Hafez • The highest level of safety, security and reliability. Former Chairman of the Board, representing Government • A seamless travel experience with exceptional customer care. Shareholdings’ Management Company (Until 19 June 2016) • Value for money through maintaining cost efficiency. Mission To ensure our team is motivated and work productively, H.E. Akel Biltaji because we offer: Vice Chairman, representing Government Shareholdings’ Management • A healthy and stimulating work environment with open dialogue Company (from 26 February 2017). and and participation. H.E. Dr. Nofan Mansour Al-Akeel • Competitive employment benefits and rewards. Former Vice Chairman, representing Government Shareholdings’ • Opportunities for training and career development. Management Company (from 17 April 2016 until 22 January 2017). • Energetic and decisive leadership. Values To ensure our shareholders invest in the Company because we H.E. Marwan Mahmoud Awad deliver: Former Vice Chairman (until 14 April 2016) • An attractive return on investment. H.E. Eng. Basem Khalil al-Salem • Sustainable profitable growth. Member, representing Government Shareholdings’ Management • The highest levels of corporate integrity and responsibility. Company (from 17 April 2016) To ensure Jordan remains proud of us because we: • Represent the best of Jordanian hospitality and culture. H.E. Dr. Izzidin Muyhieddin Kanakriya • Promote Jordan as a destination and a gateway in the Middle East, Member, representing Government Shareholdings’ Management for both business and leisure travelers. Company (from 17 April 2016) • Support local communities and charities. H.E. Captain Suleiman Reda Obaidat Values: Member, Acting General Manager/CEO representing Government • We strive for excellence and for those who succeed in our Company shareholdings’ Management Company. to be team players. • We enjoy working and succeeding through effective communication H.E. Eng. Alaa Aref Batayneh and believe we can achieve more by working together as a team. Member, representing Government Shareholdings’ Management Company (Until 14 April 2016) • We respect people’s opinions and learn from our differences. Objective: H.E. Eng. Samer Abdul Salam Al-Majali • We make decisions based on hard facts and robust business cases, Member, representing Mint Trading Middle East Ltd. (from 23 November not on emotions or opinions. 2016) • We always provide data to make our point and convince our colleagues. H.E. Mohammad Sharif Ali Al-Zubi Reliable: Member, representing Mint Trading Middle East Ltd. (Until 23 October 2016) • We constantly endeavor to provide customers with their needs. • We guarantee strict compliance with the Company’s internal policies H.E. Maher Najib Mikati and external regulatory requirements. Member, representing Mint Trading Middle East Ltd (Until 14 April 2016) Committed • We are dedicated to delivering the best to our stakeholders. H.E. Imad Jamal Al-Qudat Member, representing Social Security Corporation. • We set and achieve high performance standards. • We take responsibility for our actions and our work. H.E. “Mohammad Ali” Issam Bdair • We listen and respond to both our external and internal customer Member needs. Caring H.E. Michael Nabeeh Nazzal • We are understanding and helpful to our customers. Member (from 14 April 2016) • We always try our best to be supportive and accommodating to our H.E. Samer Anis Muasher colleagues. Member (Until 14 April 2016) • We aim to deliver standards to others that we wish for ourselves. Trustworthy Auditors • We are always honest and transparent with our customers, partners Ernst & young and employees. • We nurture trust and respect in our working environments, and Legal Advisor promote an atmosphere of open communication. Ahmad Abu Arkoub & Partners – Law Office Hani Al-Kordi – Law Office 8 9 Chairman Chairman of the Board of Directors Speech Dear shareholders, of the On behalf of my colleagues on the Board of Directors, I would like to extend to every shareholder in the Board of national carrier Alia – the Royal Jordanian Public Shareholding Company – my thanks and best wishes. This national organization has a key strategic role in our country's economy, connecting Jordan to the Directors world with pride and professionalism while competing with global peers. Speech Dear shareholders, As the national carrier of Jordan, Royal Jordanian contributes to the Kingdom's progress as one of the economic pillars of the nation. Royal Jordanian has been the cornerstone of Jordan’s air transport industry, enjoying regional and international reputation due to its dependable air operations, competent and well-trained manpower, and modern fleet which serves an extensive network of destinations spanning four continents. Royal Jordanian directly contributes about 23%- to the Gross Domestic Product of the Kingdom, exceeding the contributions of other well-established economic sectors. A keen observer of RJ's journey and the challenges it has been facing over the past few years will recognize that RJ is not alone in facing hurdles; these situations are shared by all self-reliant companies in the world due to the sensitivity of the air transport industry and its vulnerability to economic, political, security, societal, and even health and environmental variables. A few giant air carriers in our region are an exception; they are immune, financially, to the consequences of events and variables because they are financed almost entirely by their governments. This pushes smaller airlines like RJ to work hard and compete, a tough mission, no doubt. Dear shareholders, Over the past few years, several circumstances and challenges affected RJ's resources and results, as well as its ability to attain the profitability desired by the shareholders and its management. During these past years, fuel prices grew at an unprecedentedly high rate. Additionally, the global economic recession of 2008, 2009, the Arab Spring and their consequences on the region that are felt until today, played a major role in the profitability of the airline. In parallel, new challenges appeared in 2016, like the currency exchange rates, whose effects of the end year results I will explain later. Simultaneously, the steep and unfair competition presented by larger carriers in the region continue to affect smaller airlines. The 2016 results did not conform to those sought by the Royal Jordanian management, its employees and shareholders. The main reason that led to incurring a net loss of JD24.6 million is the provisions for currency devaluation of the Sudanese Pound and the Egyptian Pound of JD19.5 million, due to decisions taken by the Sudanese government to impose incentive fees on currency transfers outside Sudan and the decision of the Egyptian government to float the Egyptian Pound during 2016, in addition to the provision of JD3.5 million in compensation of voluntary staff release. These two factors alone resulted in the loss of JD23 million. The second reason for net loss in 2016 was the decrease in revenues from the drop of ticket fares by 11%. The operating revenues declined to JD598.3 million from JD658.1 million in 2015, because of the growing competition RJ faced in 2016 from full-service airlines and low-cost carriers; since several such regional carriers now have a hub in Amman. 10 11 Dear shareholders, Dear shareholders, RJ does not wish to justify the losses, but we care about transparency and explaining the facts and figures The commercial strategy followed by RJ is to increase revenues through various means. Through continued already published by air transport industry associations, like the International Air Transport Association review of the route network, RJ aims to offer further flexibility to passengers, while balancing out aircraft (IATA). capacity and flight frequencies to destinations in a manner that fits all seasons and changing passenger loads. This stems from RJ’s vision of “being the airline of choice that connects Jordan and the Levant to the world”. Although RJ's operating revenues fell by 9%, Royal Jordanian decreased its operating costs by 6%, from JD559.1 million in 2015 to JD527.7 million in 2016, helping it attain a JD5 million net operating profit, RJ flies to 52 destinations over four continents. A few destinations were shut due to commercial reasons, compared to JD30 million in 2015. and eight destinations are suspended due to security reasons; Damascus, Aleppo, Mosul, Tripoli, Benghazi,