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... Previously hindered by limited infrastructure, Jordan's aviation industry has begun to take off, with a newly privatized carrier embarking on a dramatic expansion program and a major airport undergoing a $700 million renovation. Speaking at national carrier Royal Jordanian's recent corporate conference, Chairman Nasser Lozi said 2007 was a pivotal year for the airline, with over 71 percent of the former state-owned enterprise's shares now held by private investors following one of the "most efficient and successful privatization programs ever".The initial public offering (IPO), concluded in December, was heavily oversubscribed, bringing in over $230 million. Although the government still retains the single largest share, with 29 percent, the rest is now in the hands of private investors. M1 Group, a Lebanese firm with aviation holdings across the region, has the second-largest share, at 19 percent, while approximately 8 percent has been set aside for Royal Jordanian employees. Some 55 percent of the total shares in the airline are held by Jordanian investors. Most of the airline's non-core assets were sold prior to the IPO, including its catering division, which was partially acquired by UK-based Alpha Group in 2001. The 45-year-old airline has been slated for a private placement since the mid-1990s but had been struggling with a debt burden in excess of $600 million. With the slowdown in the worldwide aviation sector, the plan was frozen until 2006, when it was revived with the help of Citigroup and turned into a straight IPO. Speaking with the press, CEO of Royal Jordanian, Samer Majali, said the privatization would help the carrier increase efficiency, expand its footprint and improve its public image.The benefits are already evident, as the airline has been bolstering both its fleet and service network. Royal Jordanian recently announced service to Hong Kong, its 55th destination, following maiden voyages to Budapest and Montreal. The carrier is also is slated to begin flights to Baku, its second destination in the former Soviet Union (it already flies to Moscow), in the coming months. Royal Jordanian also revealed late last month that it will begin leasing two Boeing Dreamliner 787s, starting in 2012, on its long-haul routes, and said it would buy additional Dreamliners in the coming years. Agreements have also been signed for the purchase of Airbus and Embraer aircraft.The carrier also revealed last week that its earnings grew 17 percent last year, to over $700 million--a new record for Royal Jordanian.While the privatization of Royal Jordanian has grabbed headlines in recent months, Jordan's aviation industry has also benefited from an upgrade of the country's principal airport, Queen Alia International (QAIA). A consortium, led by France-based AE[umlaut]roports de Paris and the Abu Dhabi Investment Company, won a $700 million 25-year concession in April of last year to construct and operate a new terminal. Once completed, the airport, which handles over 90 percent of the Kingdom's total air traffic, will boast improved services and a terminal designed by London-based Foster & Partners. According to consortium members, the development will encourage an estimated $1 billion in private investment, and is slated to boost QAIA's capacity from 3.5 million passengers to over 9 million by 2010. A push for greater liberalization policies looks set to further encourage the civil aviation industry.Although Jordan currently enjoys an "open skies" agreement with the US, the government is in the process of assembling a national air transport strategy for 2008-2010 which aims to deregulate the sector, boost domestic competition and increase the number of open skies policies with other countries. King Hussein International Airport, located in Aqaba Special Economic Zone, has already taken a number of steps to open its airspace, establishing itself as an "open skies airport", introducing an expansion plan and privatizing a number of its services. Imad Fakhoury, chairman and CEO of the Aqaba Development Corporation, the body charged with overseeing Aqaba's development, told OBG, "Aqaba's airport aviation cluster did not exist three years ago but the push for liberalization has attracted several large investors for new projects, worth an estimated $100 million, at the airport."Jordan's high-flying airline industry is indicative of a broader regional trend. The Arab region has shown some of the fastest traffic growth in the world. Six of the world's top 20 growth markets for the aviation sector are located in the Middle East and in 2007, for the fifth year in a row, the Middle East led the world's traffic growth, reaching 13.4 percent in inter-regional traffic and 6.4 percent for intra-regional traffic, according to the Center for Asia Pacific Aviation.The region's high market growth does not appear to be a statistical anomaly. Given the MENA region's rapidly-expanding tourism sector, its high liquidity, lack of viable transportation alternatives and fast rate of population growth, the gains made by the aviation sector look to be sustainable. According to Global Futures and Foresight, a London-based think tank, with the over $25 billion governments are pouring into their airport expansion projects, capacity in the region is expected to reach over 300 million passengers by 2025. A* OBGReady for take off

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Publication:The Star (Amman, Jordan)
Date:Feb 27, 2008
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