VZCZCXRO7540
RR RUEHDE RUEHDIR
DE RUEHAM #0078/01 0090811
ZNR UUUUU ZZH
R 090811Z JAN 08
FM AMEMBASSY AMMAN
TO RUEHC/SECSTATE WASHDC 1406
INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RHMCSUU/FAA NATIONAL HQ WASHINGTON DC
RUEHEG/AMEMBASSY CAIRO 3464
RUEHLB/AMEMBASSY BEIRUT 2765
RUEHDM/AMEMBASSY DAMASCUS 3772
RUEHTV/AMEMBASSY TEL AVIV 0937
RUEHJM/AMCONSUL JERUSALEM 4783
RUEHHK/AMCONSUL HONG KONG 0036
RUEHBK/AMEMBASSY BANGKOK 0117

UNCLAS SECTION 01 OF 02 AMMAN 000078 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR NEA/ELA AND EEB 
 
E.O. 12958: N/A 
TAGS: EAIR ECON KPRV JO
SUBJECT: JORDAN REAPS $232 MILLION FROM ROYAL JORDANIAN AIRLINES IPO 
 
Sensitive but unclassified. Not for internet distribution. 
 
REF: A. 07 Amman 4923 
      ¶B. 07 Amman 4426 
 
¶1. (U) SUMMARY: The Government of Jordan sold 71 percent of national 
air carrier Royal Jordanian's (RJ) shares in a recent IPO and raised 
$232 million.  During the IPO road show, RJ President Samer Majali 
highlighted RJ's growth in a growing region and the profitability of 
its Iraq routes.  Since being listed on the Amman Stock Exchange, 
RJ's stock has not fluctuated greatly.  RJ has also announced a new 
route to Hong Kong, and King Abdullah announced plans for a new 
Jordan Valley airport.  End Summary. 
 
¶2. (U) On December 17, stocks of national carrier Royal Jordanian 
were listed on the Amman Stock Exchange (ASE) after an initial 
public offering (IPO).  The Government of Jordan floated 59.9 
million shares in the IPO which represented 71 percent of RJ's total 
issued shares.  The government will retain a 26 percent stake, and 
three percent of shares will be allocated for the Jordanian Armed 
Forces (JAF) (Ref B).  IPO share prices were set at JD 3.08 ($4.32) 
and raised $232 million.  The largest blocks of shares sold were 16 
million shares to Beirut-based investment firm M1 Group, 6.4 million 
shares for the RJ employees' fund, and 8.4 million shares sold to 
Jordan's Social Security Corporation. 
 
¶3. (SBU) Citigroup Global Markets served as the global IPO 
coordinator and Arab Jordan Investment Bank (AJIB) was the Jordanian 
lead manager.  Hani al-Qadi, AJIB General Manager, expressed 
pleasure to EconOff regarding the IPO, but representatives from 
other Jordanian investment banks said they had declined the 
opportunity to serve as the lead manager or to buy shares based on 
what they asserted were the company's weak fundamentals. 
 
¶4. (SBU) During the IPO road show, RJ president Samer Majali said 
that all of the IPO proceeds will go to the Government of Jordan and 
none to RJ, but that RJ's liquidity is solid.  Majali outlined RJ's 
strengths to the 40-person audience: presence in the high-growth 
Middle East market; position as leading carrier in the Levant; 
high-quality product; competitive cost structure; membership in 
three marketing alliances: oneworld, SkyTeam, and Star Alliance; and 
a long-serving Jordanian management team partnered with 
strategically selected outsiders. 
 
RJ REVENUES DERIVED FROM PASSENGER TRAVEL 
----------------------------------------- 
 
¶5. (SBU) Commenting on RJ's revenues, Majali said 80 percent came 
from passengers, three percent from charter flights, eight percent 
from cargo, and nine percent from other sources.  He also said that 
50 percent of RJ's traffic is transit traffic with an Amman layover. 
 He identified as one of RJ's greatest strengths its 30 weekly Iraq 
routes which are earning high revenue because of weak competition. 
Majali downplayed future competition from low-cost carriers (LCCs) 
because they have been slow to enter the Middle East due to a lack 
of open skies agreements, low internet penetration, low credit card 
use and a lack of secondary airports.  While LCCs have 25 percent 
market share in the United States and 11 percent in Europe, they 
have only a 1 percent market share in the Middle East. 
 
¶6. (U) A November financial report prepared by Arab Advisors Group, 
a subsidiary of AJIB, emphasized RJ's strengths including passenger 
growth and its ability to benefit from unfavorable regional 
conditions and political events which hamper other flag carriers 
(Middle East Airlines, Syrian Arab Airlines, and El Al).  The report 
noted, however, the decline in RJ's share of the cargo market, and 
the fuel subsidies received by other competing carriers. 
 
¶7. (SBU) Since the IPO, RJ's stock has fluctuated between $4.03 and 
$4.54 with moderate trading volumes.  Salem Ghawi, consultant to 
Executive Privatization Commission told EconOff on January 6 that 
the IPO was successful and said that the share price remaining close 
to the IPO price is a testament to the "fairness" of the IPO price. 
 
 
RJ EXPANDING TO THE ASIAN MARKET 
-------------------------------- 
 
¶8. (U) This week, Royal Jordanian announced that its passenger 
 
AMMAN 00000078  002 OF 002 
 
 
numbers increased 17 percent in 2007 to 2.1 million.  RJ's seat 
factor or occupancy increased from 66 percent in 2006 to 71 percent 
in 2007.  Departures increased by 18 percent and flying hours rose 
by 14 percent.  RJ also announced it will begin service to Hong Kong 
via Bangkok at the end of the month.  Jordan Investment Board (JIB) 
Assistant CEO Issa Gammoh told EconOff that Jordan is working 
diligently to increase its relationship with China, and JIB will 
open an office in Beijing this year (Ref A).  During the IPO road 
show, Guido Ruther, RJ's Vice President for Network Management and 
Alliances said that the airline is also working hard to open up RJ 
to the U.S., particularly an Amman-Los Angeles route.  NOTE: RJ 
currently serves North America in New York, Chicago, Detroit and 
Montreal. END NOTE. 
 
¶9. (U) In other aviation news, King Abdullah announced plans in late 
December to build an airport in the northern Jordan Valley with the 
aim of helping the area market its agricultural produce better.  The 
privatization of Queen Noor Technical College was also completed and 
ownership was transferred from the government to Royal Jordanian Air 
Academy. 
 
Visit Amman's Classified Website at 
http://www.state.sgov.gov/p/nea/amman 
 
HALE