Royal Jordanian seeks to end payments to Indian government
Thursday October 20, 2005 Royal Jordanian will stop operating to India if it has to continue paying royalties to the Indian government, President and CEO Samer Majali told ATWOnline in Amman. "The board of directors decided recently that if India does not cancel the royalty scheme, we will be shutting down our operation in early 2006," he said. "We feel that we carry the full burden of operating flights between Jordan and India. Not only do we incur losses on our Indian operations as a result of these royalties, but we pay Indian airlines for their privilege of not operating to Jordan. We think it has been enough." RJ has paid a fixed royalty per passenger per sector to the Indian government since it started serving the country about 20 years ago. It operates seven flights per week to three Indian cities--Delhi, Mumbai and Calcutta--using A310s. RJ is not an exception; other airlines operating unilaterally to India are, or were, subject to royalty payments. But Majali noted, "Jordan is a small country. Our negotiating power with India is very limited. They imposed a hefty royalty on us, currently the highest royalty that exists in India. It amounts to several million dollars every year." New carriers into India do not have to pay the royalties and bilateral operations are excluded. Ending flights to India and then restarting as a "new" carrier is an option, Majali admitted, "but it is disruptive to customers. In the coming weeks we'll try to plead our case to the Indian government. If it falls on deaf ears we stop the flights." In spite of the fees and the high cost of fuel, he expects RJ to post a profit for FY05, "although not on the same level of last year." The carrier will announce in the coming weeks its choice of regional aircraft. It is in advanced negotiations with Bombardier, Airbus and Embraer for an order for up to 15.