Israelis Stay Home During Gaza War, Further Sinking Airlines’ Revenues

El Al says cancellations and a slowdown in new reservations will cut its third-quarter revenues by $30 million, to $40 million.

Moti Milrod

The fighting with Hamas in Gaza is badly slowing the flow of foreign tourists into Israel, but Israelis, it turns out, have decided to wait out the turmoil at home rather than seek a safer environment abroad. This development is badly weighing on airlines’ revenues.

El Al Israel Airlines reported to the Tel Aviv Stock Exchange yesterday that it is suffering a slew of cancellations both by Israelis who have scrapped their plans to go abroad and by foreign tourists who have canceled, or at least deferred, travel to the Holy Land.

El Al officials estimated that the cancellations and the slowdown in new reservations would cut the carrier’s third-quarter revenues by $30 million, to $40 million.

El Al has announced a liberalized policy for changing and canceling reservations, to be in effect until July 25. Israelis with El Al reservations who are already abroad will be able to return to the country early without paying a penalty. Or they can defer their return to Israel to the end of August – also without a penalty.

The chief executive of a smaller El Al competitor, Arkia, said the Israel Defense Forces’ two-week-old Operation Protective Edge had disrupted business at the airline in many ways, both domestically and on international routes. Chief executive Nir Dagan said his company’s business this summer is thought to have dropped by a double-digit percentage compared with a year ago.

His company is also working against the backdrop of call-ups of employees for reserve duty, creating a shortage of staff, especially pilots. Arkia is trying to boost demand by offering special promotions to encourage Israelis to travel abroad.

Soured relations between Jerusalem and Ankara, which have included anti-Israel demonstrations in Turkey and hostile remarks by Turkish Prime Minister Recep Tayyip Erdogan, were followed on Saturday by a travel advisory by the Israeli Foreign Ministry. Jerusalem urged Israelis to avoid nonessential visits to Turkey; Israelis who have to go there should be particularly vigilant.

“The crisis in Israeli-Turkish relations has diverted passenger traffic to Greek islands such as Rhodes and Crete, and there is also growing interest in Barcelona,” Dagan said. “The moment there is a change for the better in the situation, we are convinced that people will want to return to their vacation habits and take advantage of the summer holiday season and fall Jewish-holiday season.”

For his part, Uri Sirkis, the chief executive of another smaller El Al competitor, Israir, noted the intensification of the fighting in Gaza at the beginning of the week. He said it had led to further drops in demand for travel at the height of the travel season.

“In addition, we have about 30 employees who have been called up for military service,” he said, including pilots, some who serve in the Israel Air Force and work at the same time.

Still, there is a silver lining. Officials at businesses that ply their wares to Israelis traveling abroad say the lull in outgoing travel could result in pent-up demand if things settle down by early August. Prices then might go up as much as 30%.

After Operation Protective Edge was launched two weeks ago and Israelis began canceling trips abroad, the country’s outgoing travel wholesalers lowered their prices for the near term. To compensate for the lost revenue, they are expected to charge more later in the summer.