El Al Israel Airlines has issued this financial statement:
In 2019, El Al was in the midst of a major upheaval in its aircraft fleet: The Company completed the removal of old fleets, received 14 Dreamliner aircraft and completed the interior improvement of its narrow-body aircraft fleet.
- Notwithstanding the fierce competition, the Company succeeded in increasing its revenues by approximately 2%, to USD $2.18 billion.
- The number of passengers flown by the Company grew by approx. 4%.
- Operating expenses decreased by about 1% to approximately USD $1.83 billion.
- Fuel expenses decreased by approx. USD $44 million as a result of the drop in fuel price and a decline in the amount of fuel consumed, despite the growth in operations, due to the efficiency of the Dreamliner aircraft.
- The initial implementation of IFRS 16 adversely impacted the profit before tax by approx. USD $18 million.
- Net loss in 2019 amounted to approx. USD $60 million, compared to approx. USD $52 million in 2018.
- Cash flow generated by the Company from operating activities in 2019 amounted to approx. USD $294 million, indicating a growth of approx. USD $203 million compared to cash flow in 2018.
- As of December 31, 2019, the cash balance in the Company’s account amounted to approx. USD $264 million.
The global outbreak of the coronavirus pandemic, which, since the beginning of 2020, has had a material adverse impact on the global economy in general and the aviation industry in particular, abruptly stopped the momentum of activities of the Company, which was among the first to be hit by the crisis.
The pandemic led to a sharp decline in demand for passenger flights and resulted in a significant number of flight cancellations in February and March 2020 up to a complete cessation of passenger flights, in view of the government guidance on self-isolation, that caused the loss of substantially all of the Company’s revenues and created a liquidity problem for the Company.
The economic crisis was accompanied by a sharp decline in demand for oil that led to a drop in the fuel price and interest rates worldwide. Having performed jet fuel and interest hedging transactions, the drop generated losses to the Company, which was required to provide deposits in significant amounts to be used as collateral, thus aggravating the damage to its cash flow.
Due to the flight cancellations, the Company is required to make refunds to customers on a material scale.
To allow the Company to cope with the implications of the coronavirus crisis and immediately reduce the cash expenditure, the Company is currently implementing a series of streamlining measures:
- Significant cut in the Company’s workforce – more than 90% of the Company’s employees are on an unpaid leave.
- Reduction in executive and board members compensation by 20%.
- Operational and financial activities aimed to reduce the Company’s expenses, including: agreed deferral of lease payments for some of the leased aircraft; cancellation of lease agreements of two 737-800 aircraft, that were expected to enter service in 2020, and the return of three wet-leased aircraft to the lessors.
- Suspension or cancellation of projects involving investments.
- Conversion of passenger aircraft for cargo operations.
- Partial release of NIS 105 million from the surplus of central compensation funds established as part of the Company’s privatization.
- Signing of a memorandum of understanding with a foreign company for the Sale and Lease Back of three 737-800 Boeing aircraft for approximately USD $76 million.
The Company is conducting negotiations with lenders and with the Ministry of Finance to obtain a loan of USD $400 million, most of which will be backed by a state guarantee.
Given the uncertainty over the completion of said assistance, which is essential to allow the Company to address the consequences of the crisis at this stage, the Company estimates that there are significant doubts about its continued existence as a going concern.
El Al’s CEO, Gonen Usishkin:
“El Al is one of the Israeli economy’s most significant corporate casualties from the coronavirus crisis, and for this reason we asked the Israeli government to assist El Al as most countries in the world have done. In the last two months the Company’s management team has been working around the clock to implement a series of operational and financial measures aimed to reduce the Company’s expenses, maintain its liquidity and allow it to operate. The Company had to halt its main operations, i.e. passenger carriage, in view of the government guidance, and it uses the wide-body passenger aircraft along with the cargo aircraft for extensive cargo operations. We established a streamlining program to allow the Company to operate in the coming years and return to profitability; however, these measures will not be sufficient without the Israeli government support.”
El Al’s CFO, Dganit Palti:
“We completed 2019 with an increase in revenue and gross profit. The Company reported a loss of approximately USD $60 million, which was also affected by the initial implementation of a new accounting standard. However, notwithstanding the loss, the Company generated unprecedented cash flow from operating activities totaling USD $294 million and completed the year with high cash balances of USD $264 million in its account. In view of the impact of the global crisis that paralyzed the aviation industry, El Al’s passenger operations have stopped, and it found itself in a serious cash flow crisis. The Company took many steps to improve its liquidity, mainly by sharply reducing its expenses and suspending investments. Concurrently therewith, we carried out financial transactions to improve the Company’s liquidity, inter alia, sale and lease back of three aircraft. We established a business plan containing profound streamlining measures that are currently in the process of implementation, and we expect the state’s decision to provide a guarantee for a USD 400 million bank loan, that will allow the Company to return to growth and profitability.”
El Al aircraft photo gallery: