El Al's Revenue Hits Five-year High

Net profit soars 54% in Q3; national airline flies more passengers despite intense competition.

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The net profit of El Al Airlines soared 54% in the third quarter, compared to the same period last year, to $57.9 million, the company announced on Wednesday. The record profit was boosted by its strongest revenues in five years and by cost-cutting measures.

While El Al's market share at Ben-Gurion Airport, Israel’s main international terminal, dropped to 30.2% in the quarter, from 31.9% a year ago, the airline flew 5% more passengers in the quarter and its load factor - a measure of seats sold - rose to 84.8% from 84.5%. As a result, revenue increased 6.2% to $643.3 million, with passenger revenue ahead 6.1%, though cargo revenue dipped 0.8%.

The company succeeded in increasing revenues despite what CEO Elyezer Shkedy said was increased competition, as the number of seats offered foreign airlines increased by 14%.

“The main change was due to the dramatic increase in the activity of Turkish airlines to and from Israel, which amounts to an incomprehensible support of the Israeli government in the international expansion of Turkish carriers at the expense of Israeli airlines, which are prevented from flying to Turkey,” Shkedy said.

He said Turkish carriers now have rights to operate 126 flights a week on Israel-Turkey routes, while Israeli carriers cannot fly to Turkey. He reiterated his call on the Israeli government to act to enable Israeli airlines to compete fairly.

While Israeli-Turkish relations have improved somewhat since their nadir in 2010, Ankara has barred Israel from using its security procedures at Turkish airports, effectively barring Israeli airlines.

On top of being blocked out of the Turkish market, Israel’s flagship carrier also faces growing competition from discount carriers, as Israel’s aviation-liberalization pact with the European Union, called Open Skies, goes into effect. In response, El Al is considering plans to offer low-cost flights

The strong quarterly results did nothing to lift El Al shares, which sank 3.5% to 60 agorot in Tel Aviv Stock Exchange trading on Wednesday.

El Al’s operating profit in the quarter grew 20% to $76 million from a year ago, a result of falling energy prices - the company kept fuel costs to just $3.6 million, an increase of 1.9%, - and a 2% drop in marketing costs. El Al is increasingly relying on direct ticket sales over the Internet and through its phone center, which saves it the 7% charge paid to travel agents.

Management costs jumped 23% to $28 million, primarily due to the appreciation of the shekel against the U.S. dollar, the currency in which El Al reports it results. Overall, the company’s payroll stood at 6,109 at the end September, down from 6,136 a year ago.

El Al is in the processing of renewing its fleet, retiring the last of its Boeing 767-200 jets last month and taking delivery of eight 737-900ER aircraft, four of which will be flying by next summer.

An El Al plane on the runway at Ben Gurion Airport.Credit: Moti Milrod

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