El Al in $1.25 Billion Boeing Dreamliner Deal, Airline’s Biggest Order Ever

The first planes will go into service in 2017, and the CEO pledges that the purchase costs won’t be passed on to passengers.

Reuters

El Al Airlines agreed late last week to buy or lease 15 Boeing 787 Dreamliner jets, the carrier’s biggest order ever, for some $1.25 billion.

El Al said it would buy five of the smaller 787-8 planes and four of the bigger 787-9s, and lease another six from international aircraft-leasing companies.

Of the nine it is buying outright, El Al said it would resell two to a leasing company and then lease them back. The carrier placed options for as many as 13 more jets.

The first of the planes is due to go into service in the summer of 2017 and replace aging 747-400s and 767s on medium- and long-haul routes, the airline said.

The Dreamliner is Boeing’s most fuel-efficient aircraft, using lighter composite materials in the airframe and technology that reduces noise and heat.

El Al CEO David Maimon promised that the costs of the huge order would not be passed on to passengers. “El Al fares are lower than they were in 2013 and there’s no reason El Al should change its policy because of the new planes . Nothing will be passed on to the customers,” he said.

Although incoming tourism has been in a slump since the 2014 Gaza war, El Al has been riding a big increase in air travel prompted by the 2013 Open Skies pact with Europe, which has increased competition and reduced airfares. The Israel Airports Authority said traffic at Ben-Gurion International Airport was up 34% in September at 1.65 million travelers, much of it due to a surge of Israelis traveling abroad.

Only about 15% of the new order will be financed internally from El Al resources, with the rest coming from banks and other lenders.

“Part of the financing will come from the plane’s greater operating efficiencies,” Maimon said. “Operating these planes is a lot cheaper – they use 20% less fuel, inspections are required only once every three years instead of once every two and a half, and the planes are grounded for just eight days instead of a month or month and a half. In addition, replacement parts are a lot cheaper.”

The order confirms El Al as one of the biggest airlines in the world flying an entirely Boeing fleet, as against jets made by Europe’s Airbus.

“Airbus put up a very good fight,” Maimon said. “What tipped the scales in the end was that Boeing’s technology was slightly more advanced than Airbus’ and that Boeing was willing to move closer to us in terms of price.”

On Sunday, El Al shares fell 0.7% to close at 1.81 shekels (47 cents) on the Tel Aviv Stock Exchange.