El Al Airlines, which a day earlier had discounted the financial impact of flight disruption caused by a pilot labor slowdown, said on Tuesday that third-quarter profit had dropped 25% due to the slowdown.
Israel’s flagship carrier said net profit had fallen to $70 million from $93 million a year earlier in the three months ending September 30. Revenues edged 0.5% lower to $644 million, but that was due to falling airfares. The carrier’s sold 13% more tickets than the same time in 2015 and it increased its market share to 33.4% from 32.1%.
But El Al conceded that its operating costs had jumped $55 million – after discounting the savings from lower fuel costs – from a year earlier because it was forced to cancel and reschedule flights, and lease aircraft to fill scheduling holes created by the slowdown.
The labor dispute has grown worse in the last week and a half after management decided to crack down on the practice of pilots flying on one way of a round-trip flight and collecting pay while they fly as passengers on the return leg.
El Al shares plummeted 12.8% to 3 shekels (78 cents) on the Tel Aviv Stock Exchange on Tuesday.
Noam Pinko, an analyst at the investment house Psagot, lowered his target price for the airline to 4.20 shekels from 4.50, but said investors should focus on the good news at El Al – namely low energy prices and growing passenger loads.
“We believe the flight disruptions are costing the company more than a quarter of its annual profit and are hurting shareholders,” he said. “Despite the fact that the company won’t meet our forecast annual profit [$108 million], we retain a Buy recommendation and assume that the problems will be solved and, thanks to low fuel prices, profits will be higher.”
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