Economics

Economic Impact Study of Royal Air Maroc

A REPORT PREPARED FOR RAM

Executive Summary
October 2017

Group 5:- Mohammed Ansari, Naim Pierali, Laureline Barrere, Thomas Guichard, Jorge Mandado, Abdelhamid Aouadi
 Economic Impact Study of Royal Air Maroc - October 2017

Executive Summary
Casablanca based Royal Air Maroc (RAM) is one of the regions largest airline and fastest
developing carriers. This summary analyses four different scenarios for the state carrier. The
current business model, operation strategies and route planning limits the airlines operations in
different prospering sectors.
As RAM has been seeking greater success and access to these sectors, the state owned airline
contracted RoyalFive Consulting Group of ENAC to study and recommend the potential model
and its economic impact on the airline.

i. Introduction of new routes and 1 extra flight into Brazil:

- Introduction of 2 new flights to Recife
- Increasing 1 extra flight to Sao Paolo via Recife

a) A used Boing 767-300ER will be sourced and purchased to put into the
Brazilian Operations.
b) 39,500 pax are expected from/to Recife and for this operation 3 flights per
week is planned considering 80% load factor. Calculated annual profit for
the route is $25,627,556.

Summary:
2 flights CMN - REC - CMN
1 flight CMN - REC - GRU - CMN

ii. 3.8M Chinese tourists arrived in Morocco during the 1st half of 2017 and the number is
expected to grow to a total of 9M by the end of 2017. Forecasters expect this number to
increase in the next years.

a. Proposal to open a new DIRECT route to Beijing, which currently does not exist via
any other carrier.

b. The load factor for this route utilizing a 747-800 is forecasted to be 95% and a
frequency of 6 flights per week is strongly encouraged for this load factor. Reason
is that RAM must target at least 3% of the total tourist population coming to
Morocco to begin with. At this rate the annual profit is projected to be
$109,501,129.

c. Boeing currently has 2 B747-800 in their stock which hasnt been sold. There is an
offer on these two jets at the moment out of which one should be considered by
RAM for use on the Beijing route and one more on another proposal mentioned
below.

iii. Hajj and Umrah operations from Morocco to Saudi Arabia:

There are about 50,000 passengers for Hajj and about 450,000 passengers for Umrah to
be operated from Morocco. These 50,000 passengers are to be moved within a given
time frame of ~22 days, which is quite challenging, given the constraints of the inbound

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 Economic Impact Study of Royal Air Maroc - October 2017

and outbound phase structure of the Hajj aviation business. RAM can approximate a
share of ~35,000 Hajj passengers and ~300,000 Umrah passengers for these operations.
One current B747-400 shall be put in service to Jeddah and one new B747-800 shall be
introduced to Madinah. The same aircrafts will remain operative for Umrah flights
proceeding Hajj. By nature, these flights are operated like a full-fledged air-taxi
service at a 100% load factor. The low cost of Jet A1 in Saudi Arabia adds to the profit
margins in these operations a price of $0.52 per litre inclusive of fuel flow charges
and taxes.
Summary:
12 Months 2 Months dedicated to Hajj ops & priced at $1600 per pax Remaining
10 Months dedicated to Umrah Ops Out of which 3/10 Months are Peak Umrah
seasons priced at $1500 per pax and 7/10 months off-peak priced at $1100 per pax.
For Hajj ticket price at $1600:
Jeddah - Load Factor 100% Madinah - Load Factor 100%
Per Pax Per Fq. Per Pax Per Fq.
Revenue 1613.43 1,606,977.86 Revenue 1,613.20 1,606,743.67
Ticket 1,600 1,593,600.00 Ticket 1,600 1,593,600.00
Costs 392.9 391,324.28 Costs 389.44 387,885.63
Route Profit/Loss 1220.54 1,215,653.58 Route Profit/Loss 1223.75 1,218,858.04

For Umrah during off-peak season ticket price at $1100:

Jeddah - Load Factor 100% - Off-Peak Madinah - Load Factor 100% - Off-Peak
Per Pax Per Fq. Per Pax Per Fq.
Revenue 1113.43 1,108,977.86 Revenue 1,113.20 1,108,743.67
Ticket 1,100 1,095,600.00 Ticket 1100 1,095,600.00
Costs 357.83 356,395.02 Costs 354.44 353,025.63
Route Profit/Loss 755.61 752,582.84 Route Profit/Loss 758.75 755,718.04

iv. In order to make all these routes profitable and workable, the image of the brand name
Royal Air Maroc has to be improved. Hence a new department has to be integrated
within the RAM framework. The main purpose of this department will be to tackle
issues such as, but not limited to:
a. Customer relations
b. Under-rated catering
c. Ground & Air Crew Training
d. Baggage Handling
e. Cabin Interior Upgrade
f. Customer loyalty
g. In-flight innovation
h. Social Media
i. Complete flight experience
This department will employ one experienced personnel from the industry to overlook the
quality of complained-of services and use of the train-the-trainer strategy will be
implemented through tths department. The responsible of each department will be assessed
for their work done and any discrepancy will be immediately addressed.
RoyalFive Consulting Ltd. an ENAC Subsidiary