ROYAL JORDANIAN IPO ON SCHEDULE FOR DECEMBER

UNCLAS SECTION 01 OF 02 AMMAN 004426

SIPDIS

SENSITIVE
SIPDIS

STATE FOR NEA/ELA AND EEB

E.O. 12958: N/A
TAGS: EAIR ECON EINV KPRV JO
SUBJECT: ROYAL JORDANIAN IPO ON SCHEDULE FOR DECEMBER

Sensitive but unclassified. Not for internet distribution.

REF: A) Amman 4072
B) Amman 3286
C) Amman 1299


1. (U) Summary: Royal Jordanian (RJ) Airlines president Samer Majali
said that RJ's initial public offering is on schedule for completion
in 2007. Majali expects that 60 percent of shares will be
Jordanian-owned. RJ selected the GEnx engine for its
previously-ordered Boeing 787s due in 2010. RJ had its highest
monthly volume of passengers ever in August 2007, and expects its
business will grow its regional focus. End Summary.

IPO PROSPECTUSES WILL GO OUT IN MID-NOVEMBER
--------------


2. (U) EconCouns met with Samer Majali, President of Royal Jordanian
Airlines, on October 29 to discuss the status of RJ's initial
private offering (IPO) and its recent performance. Majali said RJ
is working closely with its lead investment bank Citigroup, and IPO
prospectuses are expected to go out in mid-November. He said he is
consulting with multiple investment banks, and that a share price
will be set on December 8. Majali expected that RJ's IPO and its
listing on the Amman Stock Exchange would be completed by the end of
December.


3. (U) When RJ's privatization was first planned, Majali said that
RJ expected to sell its shares to a foreign carrier that would serve
as a strategic partner. The growing strength of RJ as a business,
as well as increased travel to Jordan and the Middle East, has meant
that RJ is able to go public independently without a strategic
partner. According to the GoJ plan (Ref B),the current sole owner
- the government - will sell up to 74 percent of the RJ shares, of
which 51 percent must be sold to Jordanians. Majali said he
expected that 60 percent of the shares would be Jordanian-owned
after the IPO. Three percent of shares will be allocated for the
Jordanian Armed Forces (JAF),and eight percent of shares are set
aside for RJ employees.

RJ CHOOSES GE ENGINE
--------------


4. (U) In October, RJ selected the GEnx engine to power its
previously-ordered Boeing 787s (Ref C). RJ's first 787s are
scheduled to be delivered in 2010, and when delivered, RJ will be
the first carrier in the Middle East flying GEnx-powered 787s.
While Boeing has announced a six-month delay for the first 787s,
Majali expressed hope that Boeing will be on-schedule by the time
RJ's airplanes are due for delivery. Majali said that RJ will use
the 787s for trans-Atlantic travel, and that its current Airbus and
Embraer airplanes will fly regional routes.

BUSINESS IS GROWING
--------------


5. (U) RJ announced that in August 2007 it had its highest volume of
passenger traffic ever with 256,000 passengers, marking a 16 percent
increase over August 2006. RJ operated 2708 departures in August,
an increase of 23 percent over August 2006. Aircraft utilization
increased 16 percent from 10.1 to 11.7 hours per day. Majali told
EconCouns that he expected RJ's business to grow regionally and to
focus less on long-haul flights. He said that RJ has difficulty
competing with the state-subsidized Emirates airline, noting that
other Middle Eastern carriers are also less affected by fuel price
increases because of government support.


6. (SBU) Majali did not express concern about Delta's recent
decision to provide non-stop service to Amman (Ref A). He said
Delta would operate just four flights weekly, while RJ would provide

16. He hoped that Delta's service would encourage more Americans to
visit Jordan. He did question Delta's decision to fly from New
York's John F. Kennedy (JFK) Airport rather than its main hub in
Atlanta, which he thought would provide greater product
differentiation.

LONG-TERM EMPLOYEES
--------------


7. (SBU) Majali said that he has worked for RJ since 1979. He
described RJ as a family, and said the company has benefited from
employees' tenure and multi-generations of employees from the same

AMMAN 00004426 002 OF 002


families. Many of these employees remained loyal to RJ following
the 1988 economic crisis and the 1990 Gulf War that almost crippled
RJ when its fleet was evacuated to Vienna. The decision to
privatize resulted in down-sizing, and for many employees the
transition from a public-owned utility to a private company has been
difficult. Nevertheless, most current employees want to stay, and
he predicted the employee stock options from the IPO will help
retention. He commented that RJ's salaries are above average
Jordanian government salaries but far below other private sector
employers, but perks such as free tickets helped to offset the
differences. He estimated that 20 percent of his employees were
non-Jordanian, especially flight attendants who are recruited for
their language ability. He said Jordanian pilots are particularly
in demand and serve in airlines around the world, employing their
private sector and military experience.

Visit Amman's Classified Website at
http://www.state.sgov.gov/p/nea/amman

HALE