El Al

El Al's plans to buy 787s will allow fleet renewal, perhaps expansion. Hainan, Cathay to Tel Aviv?

El Al's plans to acquire 15 787s are an important, and overdue, step in its restructuring process. El Al cancelled a previous order for 10, and although a new order faced 2019 delivery slots at the earliest, El Al expects to receive its first 787 in 2017 and the last in 2020. The 787s will be used to replace El Al's six 747-400s and six 767-300ERs, both with an average fleet age of 20 years. The smaller but more numerous 787s replacing the larger 747s could indicate planned flat seat growth depending on the exact configuration.

Re-fleeting will not be a silver bullet to El Al, which after returning to profit in 2013 reported a loss in 2014. El Al improved its 1Q2015 loss while 2Q2015 showed profit growth – with low fuel prices clearly influential. El Al will need to make further adjustments, especially if it looks to grow with the 13 787s it expects to have on option in addition to the 15 firm orders. North America and Europe are El Al's core markets, but Asia is appealing with growing Chinese investment. Hainan Airlines had announced a Tel Aviv service for Sep-2015, but this appears delayed. Israeli reports meanwhile say Cathay Pacific could launch Tel Aviv service in mid-2016 with new A350s.

El Al: new LCC start UP should not excuse the mainline airline from urgent cost cutting

El Al's return to a net profit in 2013 should not be allowed to hide a wide range of challenges facing the newly appointed management team of CEO David Maimon and CFO Dganit Palti. The list is long: an ageing fleet, stagnant traffic growth, falling market share, a high cost structure, an open skies agreement between Israel and the EU, growing competition from European LCCs and network carriers such as Turkish Airlines and an under-capitalised balance sheet all need urgent attention.

El Al is clearly aware of its challenges. Its summer 2014 timetable sees more aggressive growth than for some years and it has reduced average headcount over the past two years. More importantly, its new LCC subsidiary UP commenced operations on 30-Mar-2014 with five destinations in Europe.

However, it is not yet clear whether UP will be a genuinely low-cost operation. Its establishment should certainly not be used as an excuse to avoid a radical cost restructuring programme in the core airline.

Israel’s air travel markets benefit from liberalisation, but El Al is losing out to LCCs: Part 1

Israel’s air travel market seems to be attracting attention. In recent weeks, there have been headlines about new routes from Vueling, TAROM, Arkia, Transavia, Jetairfly, Wizz Air, Yan Air, Med-View Airline, easyJet, Meridiana, Air Serbia and Air Onix; and increased frequencies by TAROM, Norwegian, easyJet, El Al, Alitalia, Lufthansa and airberlin.

Following the signing of an EU-Israel open skies agreement in 2012, a factor in increased services from the EU, countries including Russia, the Philippines and Kenya are also considering developing new air services agreements with Israel. In addition, a security-related restriction on Israeli carriers operating to Turkey (one of the few major aviation markets outside Western Europe and the US that has links to Israel) looks set to be lifted.

For a country of above average levels of wealth, as defined by GDP per capita, air travel penetration is also high, but lower than for other similarly wealthy nations. The Israeli market has generally seen healthy growth in recent years, but this has been uneven. Israel has significant potential for the airline industry, but its realisation will continue to be subject to politically-driven developments on traffic rights.

Israeli market set to open up under new open skies agreement with EU

Israel’s aviation market is set to open up to a much higher level of competition following the signing of an Israel-EU open skies agreement. The eighth and final round of negotiations between Israel and the EU took place last week, leading to an agreement which will gradually liberalise over the next five years air links between Israel and the 27 nations currently within the EU.

Israel’s three main carriers have voiced concerns at the potential effects the new open skies agreement could have, with El Al in particular vulnerable to the prospects of increased competition. A rise in low-cost carrier competition could also follow relaxed aviation regulations, further pressuring the Israeli carriers.

El Al's Sao Paulo departure highlights carrier's stagnation

El Al's cancellation of its thrice-weekly flights between its Tel Aviv base and Sao Paulo’s Guarulhos Airport come after the carrier began the route two years ago. It has cited high fuel and security costs as reasons for its termination.

Over the past few months, a variety of initiatives have been taken by El Al to reverse its weakening financial position. Temporary staff will be jettisoned, fuel-inefficient aircraft will be retired and second bag charges have been imposed on some routes. But despite these efforts, profitability remains elusive.

El Al swings to net loss in 2Q2011. Shake-up in Israeli market ahead?

El Al Israel Airlines swung to a net loss of USD19.7 million in the three months ended 30-Jun-2011 (2Q2011) from a USD14.8 million net profit in 2Q2010, as costs grew at nearly three times the rate of revenue. The Tel Aviv-based carrier felt the impact of increasing fuel costs, a stronger shekel and rising competition in the quarter, prompting CEO and President Elyezer Shkedy to note that the company is working to adapt its strategies to meet challenging commercial realities.