Category Archives: El Al Israel Airlines

El Al Israel Airlines reports its financial results for 2018 and fourth quarter 2018, Boeing 747-400s to be retired

El Al Israel Airlines Boeing 747-412 4X-ELE (msn 26551) LHR (SPA). Image: 944783.

El Al Israel Airlines issued this reported today:

  • Despite the increased competition at Ben Gurion Airport, the Company’s (TASE: ELAL) revenues from passenger increased by approx. USD $54 million.
  • However, in view of the increase in fuel prices, the Company lost approximately USD $52 million in 2018.
  • The Company’s revenues for 2018 amounted to approx. USD $2,142 million compared to approx. USD $2,097 million last year (reflecting an increase of USD $45 million).
  • The Company’s revenues for the fourth quarter of 2018 amounted to approx. $493 million compared to approx. USD $512 million for the fourth quarter of 2017 (reflecting a decrease of USD $19 million).
  • The Company recorded a loss before tax of approx. USD $68 million and a net loss of approx. USD $52 million for 2018 (compared to a profit before tax of USD $9 million and a net profit of USD $6 million for 2017, respectively).
  • The Company recorded a loss before tax of USD $41 million and a net loss of USD $32 million for the fourth quarter of 2018 (compared to a loss before tax of USD $38 million and a net loss of USD $30 million for the fourth quarter of 2017, respectively).

Gonen Usishkin, El Al’s CEO:

“Following the continued implementation of the Open Sky policy, in 2018 the competition at Ben Gurion Airport intensified, with an emphasis on European and Far East airlines. The number of passengers passing through Ben Gurion Airport grew from 20.2 million to 22.3 million. Particularly conspicuous is the Government’s decision to allow Air India to fly over Saudi Arabia using a short route, whereas the Company is not allowed to fly this route, thereby eroding the Company’s profitability from this route.

Notwithstanding the competition, the Company maintained a Load Factor of 84% and increased its revenues from passengers by USD 54 million. This year, a number of factors were joined together, in particular an approx. 30% increase in fuel prices (reflecting an expenditure increase of USD $97 million), which caused the said loss.

Upon completion of replacing the 767 and 747 aircrafts with the Dreamliners, the Company will be able to realize its operational efficiency potential (pilot expenses, saving fuel consumption and maintenance expenses) and significantly contribute to improve the product and upgrade the customer experience, alongside other steps taken by the Company.

Despite the results, the Company is in the process of implementing its business plan, and this is the place to thank all the Company’s employees who make effort to return El Al to profitability, improve all operational parameters and provide excellent service to its customers.”

In order to improve its business results, the Company established a strategic plan focusing on four core areas of operations:

The Company’s activities to improve the product and customer experience

The Company is going through a strategic process of improving customer experience and, for this purpose, invests considerable resources in most areas of operations, by means of the following activities:

  • Receiving five 787-9 Dreamliners. As of today, the Company operates eight 787-9 aircrafts.
  • Closing the 767 aircraft fleet, having been in the Company’s service for 36 years.
  • Launching a fast WI-FI system. Currently, the Company operates 18 airplanes with an internet system.
  • Recruiting the Michelin Star chef, Shahaf Shabtai, to act as the Company’s chef. Chef Shabtai devised a new high quality menu dedicated to El Al.

The Company’s activities in the commercial area

The Company continues to develop a route network adapted to the Israeli passenger and offers new products to the market, as follows:

  • Launching the route to Lisbon, adding activities on selected routes (such as Newark) and refreshing SunDor route network (both routine and seasonal activity).
  • Expanding the route network through new codeshare agreements with Vietnam Airlines and LOT (in early 2019) and expanding agreements with other airlines.
  • Launching price categories adapted to passengers flying to Europe, the Far East and Africa.
  • Extending the Branded Credit Card (FlyCard) Cooperation Agreement entered into with CAL, Diners and Poalim Express, and adding a new strategic partner – Mastercard.

The Company’s activities in the operational area

The Company is acting to strengthen its competitiveness through streamlining alongside improving operational excellence:

  • In 2018, the Company launched the “Ofek 2021” Program, aiming to enhance income resources while improving and streamlining operational processes within the Company.
  • The Company is in a multi-year process of replacing several operational and commercial IT systems, and this year successfully completed the implementation of a passenger revenue management system, automated marketing system and payroll system.
  • The Company has successfully implemented the new Flight Time Limitation regulations (FTL).

The Company’s Activities relating to people and processes

Investing in the Company’s personnel and the community contributes to the stability of the organization and forms a strategic basis for improving customer experience:

  • Stabilizing labor relations following the agreement entered into with the Company’s pilots, enabling operational efficiency and flexibility vis-à-vis pilots’ lifestyle, as well as optimal planning for aircrew personnel.
  • El Al takes particular pride in its PL+ rating assigned to it by “Ma’ala”, following an extensive activity for the community, inter alia, by raising money on flights for the benefit of “ALUT ALE” organization, adopting the Paratroopers Battalion 202, volunteering activities for the benefit of the IDF Disabled Veterans Organization, “Krembo Wings”, children with cancer, holocaust survivors, children communities across Israel, and more.

Focus in 2019 onwards

The Company has reported in the past a number of initiatives to enhance income and reduce expenses, along with actions intended to improve operational excellence:

  • Receipt of six additional 787 aircrafts (a total of 14 aircrafts by the end of 2019) to significantly improve the product and customer experience. The Company expects that by the end of 2019, the average age of the aircraft fleet will decrease for the first time below 10 years.
  • Closing the 747-400 aircraft fleet.
  • Additional expansion of the route network; by adding new routes to San Francisco, Las Vegas, Manchester and Niece, alongside expansion of existing routes.
  • Preparations for opening a route to Chicago in 2020.
  • Expansion of cargo transport in the belly of the 787 aircrafts.
  • A full-fleet interior renovation of the 737-800 aircraft fleet, including replacement of seats, improvement of luggage storage areas and replacement of interior lighting.
  • Start a project of renewal interior renovation of 777-200ER aircraft fleet, including replacement of seats, entertainment system, installation of WI-FI system and renovation of the overall appearance of the aircraft cabin.
  • Update to the Frequent Flyer Club program and upgrade of internet and mobile digital platforms.
  • Modification of the model of compensation to travel agents.
  • Expansion of activities under the “Ofek 2021” program, inter alia, the chain of logistics, maintenance array and passenger service.
  • Implementation of the collaboration agreement with CAL, Diners, Poalim Express and Mastercard.

Top Copyright Photo: The last Boeing 747-400 is due to be retired by late 2019. El Al Israel Airlines Boeing 747-412 4X-ELE (msn 26551) LHR (SPA). Image: 944783.

El Al aircraft slide show:

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El Al to operate summer seasonal service to Orlando

"Beer Sheva"

El Al Israel Airlines will operate summer seasonal flights next summer on the Tel Aviv – Orlando route. The seasonal route will operate weekly with Boeing 787-9 aircraft from July 2 through August 20, 2019 according to Airline Route.

Top Copyright Photo (all others by the airline): El Al Israel Airlines Boeing 787-9 Dreamliner 4X-EDH (msn 38085) LHR (SPA). Image: 945322.

El Al aircraft slide show:

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El Al retires the last Boeing 767-300

El Al Israel Airlines on February 3, 2019 operated its last Boeing 767-300 revenue flight with the pictured 4X-EAJ.

The airline announced on social media and published these photos of the historic event:

The last commercial flight of our Boeing 767 aircraft from Milan (Malpensa) to Tel Aviv, flight LY382, landed on February 3.

The plane was received with a water salute.

Thank you 767 fleet for the wonderful years.

All photos by El Al.

El Al is coming to Las Vegas and San Francisco

Celebrating 70 years of flying

El Al Israel Airlines has announced the only nonstop flights between Las Vegas and Tel Aviv, Israel starting on June 14, 2019. The weekly nonstop flight (roundtrip) will utilize a new Boeing 787-9 Dreamliner.

Also, for Northern California residents and neighboring states, as of May 13, 2019, El Al will operate three weekly nonstop flights from San Francisco to Tel Aviv Israel on a Boeing 787 Dreamliner aircraft offering Economy, Premium, and Business Class.

Top Copyright Photo (all others by El Al): El Al Israel Airlines Boeing 787-9 Dreamliner 4X-EDC (msn 38086) (70 Years) LAX (Michael B. Ing). Image: 944741.

El Al aircraft slide show:

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El Al Israel Airlines announces 2Q and 1H financial results

Named "Tel Aviv - Jaffa", delivered on February 22, 2018

El Al’s revenues in the second quarter of 2018 amounted to approx. $547 million (US) compared to approx. $541 million in the second quarter of 2017, indicating a growth of about 1%;

Gross profit amounted to approx. $69 million compared to approx. USD 107 million in the second quarter of 2017;

Loss from operation amounted to approx. $13.7 million compared to a profit of $27 million in the second quarter of 2017;

Net loss in the second quarter of 2018 amounted to approx. $18.2 million compared to profit approx. $16.4 million in the second quarter of 2017;

Market share from passenger traffic at Ben Gurion Airport in the second quarter of 2018 decreased to approx. 26.7% compared to approx. 29.5% in the second quarter of 2017;

Aircraft Load Factor in the second quarter of 2018 stood at 83.5% compared to 84.3% in the second quarter of 2017;

The Company’s available seat kilometer (ASK) increased by about 3% and revenue Passenger Kilometer (RPK) increased by about 2%;

Average total income per RPK (Yield) dropped by about 1%;

The Company’s cash and deposit balances as of June 30, 2018 totaled approx. USD 280 million;

The Company’s equity as of June 30, 2018 totaled approx. USD 267 million;

Cash flow from operating activities in the second quarter of 2018 amounted to approx. USD 56 millioncompared to approx. USD 101 million in the second quarter of 2017;

EBITDA amounted to USD 25.4 million compared to USD 70 million in the second quarter of 2017;

The Company’s revenues for the first six months of 2018 amounted to approx. USD 1,007 millionCompared to USD 959 million in the first six months of 2017, reflecting a growth of about 5%;

Loss from operation for the first six months of 2018 amounted to approx. USD 66.3 million Compared to USD 7.1 million in the first six months of 2017;

Net loss for the first six months of 2018 amounted to approx. USD 62.1 million Compared to USD 13.6 million in the first six months of 2017.

Gonen Usishkin, El Al’s CEO:

“During the second quarter of 2018, EL Al recorded an increase in revenues compared to the second quarter of 2017, while coping with the challenges and the intensified and increased competition posed by foreign airlines, in particular low cost airlines.

During the second quarter of 2018, the Company dealt, among others, with the sharp increase in fuel prices, which was the main reason for the increase in expenses in the second quarter of the year.

We continue implementing our Dreamliner Acquisition Program. Thus far, we have received six aircrafts, the last of which arrived yesterday, and we are about to receive another aircraft by the end of 2018. Our Aircraft Acquisition Program is being implemented as planned, in line with the schedule agreed upon, and the Company continues to take the necessary steps required by the program. The demand for seats on Dreamliners is high and customer satisfaction meets the Company’s expectations.

Sales of airline tickets to European destinations commenced in the second quarter for flights starting in October, based on our new sales model of which we have already announced. The new model allows the passenger to choose the flight package best suites to his needs, to all destinations in Europe, and pay for the package based on his choice. This model is expected to enhance EL AL’s ability to more efficiently compete with all players in the European market, in particular, low cost airlines.

Once the pilot phase has been completed, we started offering Wi-Fi service on flights to Europe on 15 of the Company’s airplanes, and we intend to expand the service to other airplanes and destinations.

EL AL’s Frequent Flyer Club, both in Israel and overseas, and in particular the FLYCARD credit card, serve as a significant growth engine, which is translated into an impressive expansion trend. The number of credit card holders currently stands at about 280 thousand and the number of EL AL’s Frequent Flyer Club members has now reached the 2 million mark. In the last month we announced a modification to the terms of accumulation and redemption of points by club members and credit card holders, which will be effective as of April 2019.  This modification simplifies the accumulation method, which will now be based on cash expenses, and expands the possibilities to redeem points.

We keep accelerating the optimization of all wide-body aircrafts. To enhance customer service following the acquisition of the Dreamliner fleet, El Al is preparing for an early removal from service of the 767 aircraft fleet by the beginning of 2019.”

Dganit Palti, El Al’s CFO, noted as follows:

“In the second quarter of 2018, the Company recorded further growth in revenues despite the challenges of increased competition, expressed by the volume of traffic and the number of active players at Ben Gurion Airport. Alongside this, an increase in expenses was recorded, mainly due to the rise in jet fuel prices and the new Dreamliner aircrafts’ lease expenses.

In June 2018, the Company took a USD 145 million loan from foreign banks and Japanese investors to finance the acquisition of the 787-9 aircraft received this month.

Furthermore, on August 10, 2018 the Company received another 787-9 aircraft under ownership, which it financed with a USD 125 million loan from a foreign bank, backed by a UKEF guarantee. With this, the Company has six aircraft of this model – three owned and three leased.

The Company’s cash balances of USD 280 million and its cash flow from operating activities to be used for the continued implementation of the Acquisition Program.”

 

Highlights for the three and six-month periods ended June 30, 2018 (in USD millions):

January-June

April-June

2018

2017

Change

2018

2017

Change

Operating revenues

1,007

959

6%

547

541

2%

Operating expenses

(907)

(810)

13%

(478)

(434)

11%

Gross profit

100

148

(33%)

69

107

(36%)

EBITDA

12

81

(85%)

25

70

(64%)

Profit (loss) before taxes on income

(80)

(17)

(373%)

(23)

22

(207%)

Profit (loss) for the period

(62)

(14)

(359%)

(18)

16

(211%)

 

Profit and Loss Results for the three months periods ended June 30, 2018

1. Operating revenues – operating revenues in the reported period increased by approx. 1.1%, indicating an growth of approx. USD 5.8 million compared to the second quarter of 2018, It should be noted, that passenger revenues in the reported period decreased by 3.4 million USD as a result of the implementation of IFRS-15, according to which payments for compensation to passengers have to be recorded as a revenue reduction instead of an expense within the operating .After neutralizing this revenues from passengers increased by approx. 1.8%, representing a growth  of approx. USD 8.7 million.  This increase in passenger revenues is primarily attributable to the growth in passenger revenue per kilometer (RPK) flown by the Company and a positive impact of exchange rates of currencies in which some of the Company’s sales transactions are made, in relation to the dollar, which were partially offset by a decrease in the yield per ton-kilometer. Cargo revenues decreased by approx. 1.1% (about USD 0.4 million) and other revenues decreased by approx. USD 2.4 million.

2. Operating expenses – operating expenses in the reported period increased by approx. USD 43.9 million, indicating a growth of about 10.1% compared to the second quarter of 2017. The increase in operating expenses is primarily attributable to an increase of USD 31.4 million in jet fuel expenses; an increase of USD 9.5 million in aircraft lease expenses, mainly due to lease of three 787-9 Dreamliners that were not included among the Company’s aircrafts in the second quarter of 2017; and an increase of USD 5 million in expenses for fees, services and airspace transit fees, mainly due to the increased fee rates paid by the Company to the Israel Airport Authority for its operations at Ben Gurion Airport, and the strengthening of the euro compared to the dollar. It should be noted that the increase in operating expenses was offset by the presentation of payments in respect of passenger compensation as a decrease in income, as mentioned above.

3. Jet fuel expenses – the Company’s jet fuel expenses in the second quarter of 2018 increased by approx. USD 31.4 million (an increase of 29.5%) compared to the second quarter of 2017, mainly as a result of the increase in jet fuel prices, offset in part by the change in the results of jet-fuel hedging transactions.

The table below demonstrates the impact of jet fuel expenses on the Company’s results for the second quarter of 2018, including the impact of hedging transactions (in USD millions):

 

2018

2017

Difference

Jet fuel expenses for the period (before hedging impact)

147.0

106.3

40.7

Impact of jet fuel hedging transactions on profit and loss

(9.1)

0.2

(9.3)

Total jet fuel expenses (including hedging impact)

137.9

106.5

31.4

 

4. Selling expenses – selling expenses in the second quarter of 2018  increased by approx. USD 2.3 million compared to the second quarter of 2017, mostly due to an increase in the Company’s distribution expenses. It should be noted that USD 0.8 million represents an increase in distribution expenses due to the change in the accounting presentation of fees for interline sales, previously presented as a decrease in revenues.

5. Financing expenses – net financing expenses in the second quarter of 2018 amounted to approx. USD 8.7 million, compared to USD 4.6 million in the second quarter of 2017. This increase is primarily attributable to an increase in exchange rate differences in respect of the Company’s NIS balances, and the increase in interest expenses following the increase in the amount of loans taken by the Company over the second quarter of 2018 compared to the second quarter of 2017, as a result of receiving a 787-9 Dreamliner under ownership at the end of March (the second aircraft was received by the Company towards the end of the second quarter, without affecting financing expenses).

6. Loss before tax  – loss before tax in the reported quarter totaled approx. USD 23.4 million compared to profit before tax of approx. USD 21.8 million in the second quarter of 2017.

7. Loss for the period – loss for the period amounted to approx. USD 18.2 million compared to a profit of USD 16.4 million in the second quarter of 2017, which constituted 3% of the turnover.

Profit and Loss Results for the six-month period ended June 30, 2018

1. Operating revenues – operating revenues in the reported period increased by approx. USD 48.5 million, indicating a growth of about 5.1% compared to the second quarter of 2017. It should be noted, that passenger revenues in the reported period decreased by 6.8 million USD as a result of the implementation of IFRS-15, according to which payments for compensation to passengers have to be recorded as a revenue reduction instead of an expense within the operating expenses. After neutralizing this, revenues from passengers increased by approx. USD 42.7 million (5.0%) and revenues from cargo increased by approx. USD 6.6 million (9.2%). The increase in passenger revenues is primarily attributable to the growth in passenger revenue kilometer (RPK) flown by the Company, the increase in the yield per ton-kilometer and the positive impact of exchange rates of currencies in which some of the Company’s sales transactions are made, in relation to the dollar. The increase in cargo revenues in the reported half year is due to the increase in cargo volume as well as the impact of changes in exchange rates and a change in the implementation of an accounting standard, offset by price reduction.

2. Operating expenses – operating expenses in the reported period increased by approx. USD 103.7 million (a 12.8% growth) compared to the second quarter of 2017. This increase is attributable to a number of factors, including, inter alia, an increase of USD 54 million in jet fuel expenses, as elaborated below as well as increase of USD 18.2 million in aircraft lease expenses, mainly due to the receipt of three 787-9 Dreamliners. Moreover, operating expenses in the first half year were affected by the following factors: the growth in operations, a USD 10 million increase in payroll expenses mainly due to the impact of the strengthening of the shekel compared to the dollar, the Minimum Wage Update and a USD 10.7 million increase in expenses for fees and services, mainly as a result of the increased fee rates paid by the Company to the Israel Airport Authority for its operations at Ben Gurion Airport, among others, due to a decline in the Company’s market share at Ben Gurion Airport, which led to a decrease in discount rates obtained by the Company. It should be noted that the increase in operating expenses was offset by the presentation of payments in respect of passenger compensation as a decrease in income, as mentioned above.

The table below demonstrates the impact of jet fuel expenses on the Company’s results for the second quarter of 2018, including the impact of hedging transactions (in USD millions):

 

2018

2017

Difference

Jet fuel expenses for the period (before hedging impact)

264.5

197.8

66.7

Impact of jet fuel hedging transactions on profit and loss

(13.5)

(0.8)

(12.7)

Total jet fuel expenses (including hedging impact)

251.0

197.0

54.0

 

3. Loss for the period – loss before tax for the period amounted to approx. USD 80.3 million and loss after tax amounted to approx. USD 62.1 million reflecting 6.2% of the turnover, compared to a loss before tax of USD 17.0 million in the second quarter of 2017, and loss after tax of USD 13.6 million, reflecting 1.4% of the turnover.

Balance Sheet Data as of June 30, 2018:

1. Current assets – amounted to approx. USD 577 million, indicating a growth of approx. USD 58.5 million compared to their balance as of December 31, 2017. This growth mostly resulted from a seasonal increase in accounts receivable and prepaid expenses as well as increase in the fair value of jet fuel derivatives.

2. Current liabilities – totaled approx. USD 1,008 million, indicating an increase of approx. USD 51.7 million compared to their balance as of December 31, 2017. The change is attributable to a seasonal increase in prepaid revenues from sales of airline tickets, offset in part by a decrease in accounts payable balances as well as provisions and liabilities to employees (among othes, due to a payment in respect of the compromise agreement with the Assessment Officer).

3. Working capital – the Company had a working capital deficit of approx. USD 431.1 million compared to a deficit of approx. USD 437.9 million as of December 31, 2017. It should be noted that a substantial part of the working capital deficit does not reflect short-term cash flows, as explained below. As of June 30, 2018, the Company’s current ratio increased to 57.2% compared to 54.2% as of December 31, 2017.

As of June 30, 2018, the working capital deficit consists of substantial components included in the current liabilities section and characterized by current business cycle; however, the Company is not required to use cash-flow sources in the short term in order to repay these components: prepaid revenues from sale of airline tickets and the Frequent Flyer Club totaling approx. USD 433 million, to be settled by providing future flight services, and liabilities to employees for vacation pay in the amount of approx. USD 45 million, which are expected to be paid upon retirement but classified as a short-term liability in accordance with accounting principles. Current liabilities also include loans to finance advance payments on the 787 aircrafts, to be repaid through long-term financing obtained upon receipt of aircrafts. As of June 30, 2018, the amount attributable to these loans of the total current liabilities stands at approx. USD 65 million.

4. Non-current assets – amounted to approx. USD 1,531.9 million, showing a growth of approx. USD 198.9 million compared to their balance as of December 31, 2017, mainly due to the receipt of two 787-9 Dreamliners owned by the Company during the reported period and advance payments for the acquisition of the 787 aircrafts that have not yet been received, less current depreciation.

5. Non-current liabilities – totaled approx. USD 834.0 million, reflecting an increase of approx. USD 217.1 million compared to December 31, 2017. This increase was primarily attributable to two loans obtained by the Company to finance the acquisition of two 787-9 Dreamliners.

6. Equity – amounted to approx. USD 266.8 million. The decrease of approx. USD 11.4 million compared to equity as of December 31, 2017 was mainly attributable to the loss for the half year, which was partially offset by a USD 35.7 million increase in equity following the implementation of IFRS 15 – “Revenue from Contracts with Customers” (see note 7.A to the condensed financial statements), and improvement in the cash flow hedge fund, due primarily to jet fuel transactions carried out by the Company.

Top Copyright Photo (all others by El Al): El Al Israel Airlines Boeing 787-9 Dreamliner 4X-EDC (msn 38086) PAE (Nick Dean). Image: 941027.

El Al aircraft slide show:

El Al takes delivery of its 6th Boeing Dreamliner in a 1964 retro livery

El Al Israel Airlines is celebrating 70 years of flying. Yesterday, August 13, 2018, the company accepted the pictured sixth Boeing 787-9 Dreamliner registered as 4X-EDF (msn 63394) and named “Rehovot”. The new airliner is painted in a 1964 retro livery for the company.

All images above by El Al.

El Al aircraft slide show:

"Rehovot" in 1964 retro livery, delivered on August 13, 2018

Above Copyright Photo (all others by El Al): El Al Israel Airlines Boeing 787-9 Dreamliner 4X-EDF (msn 63394) (70th Anniversary) PAE (James Helbock). Image: 943201.

El Al to introduce a retro scheme on the next Boeing 787-9 Dreamliner

El Al Israel Airlines will soon delivery of its newest Boeing 787-9 Dreamliner (4X-EDF). The newest addition is painted in a retro livery as part of its 70th anniversary celebrations.

The airline has issued the first photos of the new bird.

Photos: El Al.