El Al is currently experiencing severe turbulence. The COVID pandemic hit all the world’s airlines hard, both financially and operationally, and is still making it difficult for the aviation industry to take off again. But the Israeli flag carrier has also been facing an additional problem: an ongoing crisis with its pilots.
One of the resulting problems from this crisis is a wave of last-minute flight cancellations, which hurt customers the most – as well as the company’s image.
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The Israeli airline canceled 78 flights in June, while a further 30 flights were canceled in the first week of July alone, according to internal company figures. In other words, over five weeks, no fewer than 108 El Al flights were grounded. Every flight carries on average some 170 to 280 passengers (depending on the size of the plane, destination and capacity). So, based on a simple calculation, well over 20,000 passengers had their flights canceled in that time.
This situation has damaged El Al’s image, with the company even addressing the matter as part of a recent request to Tel Aviv Labor Court. In it, submitted on June 16 because of the dispute with the pilots, the airline argued that the serious disruptions caused by the pilots put the company on the edge.
“The harm to passengers is intolerable. The damage to the company and the rest of the employees is also unbearable. Without ending the work sanctions and the intentional difficulties in staffing the flights … the harm to passengers, the company and its image are clear.”
There was some good news for El Al on Sunday, when the Histadrut labor federation and pilots union signed a collective bargaining agreement with El Al to enable it to function more efficiently. The new agreement will be in force until the end of 2025 and will see pilots’ salaries returning to their pre-pandemic levels by the beginning of 2023.
The bad news for the airline is that the Israeli aviation services law generally obliges it to compensate customers for canceling a flight or changing its conditions. Legally, airlines are required to refund the cost of the flight or buy a replacement ticket, based on the passenger’s choice, and also pay compensation of between 1,300 and 3,300 shekels ($375 to $950) based on the distance of the flight.
If the compensation is delayed or not refunded, customers are entitled to sue in court for compensation – without having to prove any damages – for a sum up to 10,350 shekels ($2,975).
Another simple calculation: Every canceled flight could leave El Al having to pay customers up to 2 million shekels in compensation. And this is without taking into account any damage to the brand.
Because of the COVID pandemic, demand for flights fell drastically in 2020. Regular operations were partially halted, both because of the entry restrictions imposed by many countries and isolation-testing requirements. All this led to an unprecedented crisis for the aviation industry, and El Al was one of the hardest-hit. It suffered a steep drop in revenues and ran into enormous financial difficulties, until the government was forced to step in and rescue the airline with a funding package.
In 2021, as El Al’s routes started reopening around the globe – the airline had yet to restart its customer service – it drew large numbers of complaints from customers. Finally, about two months ago, the dispute with pilots was added to its woes. Oh, and CEO Avigal Soreq left in May, to be replaced by longtime El Al employee Dina Ben Tal Ganancia.
“This story is a perfect storm for the brand,” says Gabi Attal, CEO and founder of the WhyWorry advertising agency. The crisis has a number of factors, he explains: “The first is the coronavirus, which paralyzed the industry and led to layoffs – because of which there is now a manpower shortage.
The second is the replacement of El Al’s management during the [pandemic], with all its problems. The third is the battle with the pilots, which has led to flight cancellations. And the fourth is the big mess at Ben Gurion Airport and airports around the world,” where customers regularly face lengthy delays due to staff shortages.
“This is an airline that needed to return to operating from 0 to 100 in a relatively short time. Here’s a brand that has been suffering this crisis for almost three years, and it’s not all its fault,” Attal says. “But consumers don’t always differentiate between the problems connected to El Al and those that aren’t. Because of El Al’s branding as the national airline of Israel, there are those who also blame it for the mess at Ben Gurion Airport. The company is going through problematic processes facing customers too,” he adds.
A senior executive at a large domestic travel agency that also works with El Al – which is why he asked to speak anonymously – says the company’s image has undoubtedly been hurt. “Even though flights worldwide are being canceled and running late, and Ben Gurion Airport is being run in a scandalous manner, people are especially worried about El Al flights,” he says. “Customers check with me to see if it’s safe to buy tickets with El Al.”
A separate travel agent explains that the problems with the company’s image can be felt most strongly among better-off customers. “I see businesspeople who don’t want to fly El Al anymore,” the travel agent reveals. “They’re really hesitant because they don’t want to sacrifice their businesses.
If a businessperson needs to fly to New York for an important meeting for work or a presentation for investors – it’s pretty intolerable for them if the flight is canceled. Sure, it’s also true that a family with children who have planned a vacation won’t accept a cancellation calmly. But businesspeople are more scared because the cancellation could cost them their livelihood.”
Even though the entire aviation industry is in a mess, El Al holds the record for flight cancellations at Ben Gurion Airport. The airline’s situation was particularly complex because of the dispute between the pilots and management, which lingered for weeks until Sunday’s agreement. The pilots had been dissatisfied with their salaries, which had been cut sharply during the pandemic and hadn’t returned to their pre-COVID levels.
Yet even with the labor agreement now in place, it is still not certain that the situation will improve very quickly. It is possible, for instance, that flights will continue to be canceled for various reasons, as is happening in the rest of the world. And in any case, it’s impossible to ignore what has been happened until now.
Some of the arguments raised by the company against the pilots in court last month were about severe flight disruptions that “have turned operating the flight schedules into a real war. In light of this, the company has experienced a dramatic increase in the number of sickness messages from pilots – which are received close to the time of the flight.”
El Al management told the labor court in a petition that in May, “419 crew members (captains and first officers) of the 737 and 787 fleets called in sick for flights. This was an increase of over 400 percent compared to the period before the dispute.”
Even though the crisis between management and the pilots has now hopefully been resolved, El Al still suffered huge financial losses during this period – another economic concern for the company to bear. According to El Al’s petition to the labor court, its “financial reports for 2021 show that the accumulated losses caused to the company as a result of the coronavirus crisis in 2021 and 2022 have reached almost $1 billion.” Now compensation for customers whose flights were canceled at the last minute must be added to the total.
Loyal Haredi customers
Many people wonder how El Al will recover from its accumulation of hits – and the answer to that is complicated. Travel agents and advertising experts admit that the short-term damage to the El Al brand and those financial losses are serious. But in the long run, the fact that the entire industry is suffering could actually work in the airline’s favor.
“I think El Al will actually manage to get out of this mess in the future,” says an agent at one of the large travel agencies. “It’s not necessarily related to the company per se, but because the other international airlines are canceling flights too – and the media is talking about the difficult situation for the industry globally. This leads me to conclude that people will continue to buy tickets with El Al.
“You need to remember that the company has a few big advantages,” the agent adds. “It can fly directly from Israel to all its destinations, so someone who wants a direct flight will tend to fly with it. Furthermore, a lot of Israelis still see it as the national airline, and it also has a community of ultra-Orthodox [or Haredi] customers – who are more loyal.”
A senior executive at another travel agency notes that there’s no room for sentimentality these days. “A lot of people see a flight as a functional service, which brings them from place to place,” the executive says. “That’s why, if the problems at El Al end, they’ll quickly forget and won’t be afraid of buying from them either. Everything is simply a matter of price and availability of flights. People buy a ticket based on what there is – especially when the demand is huge. It doesn’t really matter about the airline selling the ticket,” the executive argues.
Attal, meanwhile, believes that El Al’s size gives it an advantage. “I think it can recover because of its size, which is small compared to the international airlines. This will make it easier to find creative solutions after the crisis – and to highlight its relative advantages,” he says.
Haredi advertising executive Shaya Itzkowitz says that brand loyalty overcomes all other problems among the ultra-Orthodox community. “The Haredim are loyal to brands in a much stronger way than other groups,” Itzkowitz says.
“After El Al began closing on Shabbat, it became the preferred airline for Haredim. They regard it kindly – even if there are cancellations and you pay $100 more. For now, the cancellations affect them like they affect everyone else, but the affect is minor compared to the rest of the population.
“This is a conservative community that has gotten used to El Al, so they won’t suddenly decide not to fly with them. This is true for a lot of Haredim who live outside of Israel too. Even though they can fly with companies such as American Airlines or Delta, they prefer El Al. That’s how it is,” Itzkowitz sums up.