Cargo Carrier CAL May Become Israel's Fourth Passenger Airline

New entrants come as aviation is booming but Israeli carriers are ailing

A passenger plane flies in front of the moon, London, January 4, 2019.
TOBY MELVILLE/ REUTERS

CAL Cargo Airlines, an Israeli carrier that until now has limited its business to cargo, is planning to start flying people, too. The airline has applied with Israel’s Civil Aviation Authority to offer passenger service, sources at the authority told TheMarker.

CAL, which was founded in 1976 , has a fleet of Boeing 747s that specialize in flying cargo with special requirements, such as pharmaceuticals, oversize and overweight goods, live animals, dangerous goods and perishables. Its air freight and cargo handling hub is located in Belgium’s Liege airport, from where it flies to European, U.S. and Mexican cities.

If the application is approved, CAL would become Israel’s fourth airline after El Al, Israir and Arkia to offer passenger service. It will be entering an Israeli aviation market that has been booming since the start of the Open Skies reforms in 2013. The number of Israeli departures has risen from 4 million in 2009 and to 8.5 million in the first 11 months, a 7.7% increase over 2018.

But CAL will be entering a market where the existing players are experiencing trouble of different kinds. The number of carriers serving Israel routes is 50% larger than it was before Open Skies, with 140 airlines flying in and out of Ben-Gurion to 200 global destinations.

El Al, Israel’s flag carrier, reported a 27% drop in profit to $27 million for the third quarter, the year’s biggest because it includes the peak summer season. El Al has been steadily losing market share in flights coming in and out of Ben-Gurion International Airport to foreign airlines, especially low-cost carriers. In the booming air travel market in 2019, El Al showed just a 3% increase in passenger traffic.

Arkia suffered a serious setback after the Sde Dov Airport in Tel Aviv, which it used to fly passenger on its key Eilat route, was shut down last summer and caused a sharp drop in reservations. Arkia flew 11% more international passengers, a total of 760,000, in 2019, but its international business has also suffered big setbacks, including heavy losses on its Tel Aviv-Bangkok route. The airline ended the service in October just a year after inaugurating it amid heavy losses.

These and other management mistakes caused the airline to announced it was laying 100 100 employees and pay cuts of 15-35%.

Israir, which belongs to the IDB group, saw a 17% increase in its international operations last year, edging out Arkia to become Israel’s No. 2 airline with 767,000 passengers carried. Nevertheless, its third-quarter profits dropped 23% from a year ago to just $11.4 million.

The loss should have been bigger because its Eilat business was hurt by the Sde Dov closure, but the carrier took cost-cutting measures, including layoffs, and boosted revenues from ancillary services.