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Coming Soon to El Al: Competition From the UAE?

Yoram Gabison
Yoram Gabison
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Israeli flag carrier El Al's airliner carrying Israeli and U.S. delegates lands at Abu Dhabi International Airport, in Abu Dhabi, United Arab Emirates, August 31, 2020.
Israeli flag carrier El Al's airliner carrying Israeli and U.S. delegates lands at Abu Dhabi International Airport, in Abu Dhabi, United Arab Emirates, August 31, 2020. Credit: CHRISTOPHER PIKE/ REUTERS
Yoram Gabison
Yoram Gabison

It’s not clear whether El Al will get the cash to resume operating on September 21 as it has currently agreed with its pilots union, but it is clear that the international aviation industry isn’t waiting for El Al, which may be losing market share the longer it waits to resume operations.

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In the second quarter of the year El Al’s market share in dropped 15% compared to the parallel quarter of 2019, while local competitor Israir increased its market share by 11%.

Over the longer term, El Al may face a significant threat in the form of competition from the Gulf. While El Al flew the history-making flight to Abu Dhabi, the first ever flight between Israel and the UAE, two major international airlines based in the UAE – Emirates and Etihad – may now emerge as competitors to El Al. The air travel agreement Israel signs with the UAE will directly impact El Al’s service to the Far East, and possibly also North America and the competition El Al faces in general.

Abu Dhabi is an international hub for travel to and from the Far East for destinations such as Thailand and Hong Kong, and Emirates and Etihad could potentially cut into El Al’s service to these regions. The companies are known for their particularly high levels of service, and could even hurt El Al’s cargo business. The fact that Saudi Arabia is now permitting commercial airlines – including El Al – to fly over its airspace on their way to and from the UAE could make these two Gulf airlines dominant players at Israel’s own Ben-Gurion International Airport.

El Al hopes the Saudi agreement enables it to shorten flight time to destinations in the Far East, such as India, by three hours (though Wednesday's announcement only mentioned flights to the UAE), but it will also find itself facing competition that until now it was praying to avoid. The Gulf players could also cut into Turkish Airlines’ market share in Israel, for that matter, pushing Turkish Airlines to ramp up competition on other routes, such as North America.

The banks considering whether to extend a loan to save El Al are likely considering the UAE deal on the Israeli flag carrier’s financial model, and on its ability to pay its $2 billion in debt.

Not all Israeli players are looking at Saudi overflights glumly. Israir for one sees opportunity. “This is a major accomplishment for the Transportation Ministry and the Israel Airports Authority,” said Israir CEO Uri Sirkis. “Flights over Saudi Arabia will be good for Israeli consumers, and the effect of opened boarders will be more significant that the Free Skies agreement [with Europe],” he said.

Until now, Israeli companies have been at a disadvantage versus foreign airlines such as Turkish Airlines when it comes to flights from Israel to the Far East, as the Israeli airlines would need to skirt the entire Gulf, adding some three hours to trips. Flying directly over Saudi Arabia is cheaper and makes flight time shorter.

On Wednesday, Israir applied to the Transportation Ministry to operate passenger and cargo routes to Dubai.

Foreign airlines currently flying between Israel and the Far East will start facing aggressive competition from Etihad and Emirates, noted Sirkis. “For the Israeli companies it’s an opportunity,” he added.

Hadar Kane contributed to this report.

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