El Al milks monopoly on Tel Aviv - New York flights

El Al plane credit: Shutterstock
El Al plane credit: Shutterstock

During the Jewish holidays, a return ticket to New York last year cost $1,500, while this year a return ticket during the holidays costs $2,000.

Since the outbreak of the war last October, US airlines have greatly reduced and now canceled all flights to and from Israel, leaving El Al Israel Airlines Ltd. (TASE:ELAL) as the only carrier on the Tel Aviv - New York route. This situation was seen clearly in El Al’s second quarter financial report, in which the Israeli carrier had an 88.2% market share on the Tel Aviv - New York route, compared with 35.5% in the second quarter of 2023.

Prior to the latest wave of cancelations by the US airlines, which began towards the end of July, El Al was competing with Delta Air lines and United Airlines. Delta has canceled all flights to Israel until the end of August and United has canceled all flights until the end of October, at least. American Airlines, which has yet to return to Israel since the start of the war, has suspended all Israel flights until April 2025.

Consequently airfares have risen. A return ticket in September 2023 on El Al to New York cost $1,430, while next month it will cost $1,759. During the Jewish holidays, a return ticket to New York last year cost $1,500, while this year a return ticket during the holidays, which all fall in October, costs $2,000.

What would happen to fares if the US airlines resumed flights? Ophir Tours deputy chairman Yoni Waksman says, "Delta has fallen in line with El Al's fares, with prices of direct flights (which are marketed according to the planned return date) are significantly more expensive compared with previous years.

Negligible difference in dates

Pricing in the aviation world, as in many fields, is based on supply and demand. In aviation, it is also about how long before the flight that the ticket is bought, according to AI operated algorithms. El Al passengers are encouraged to buy a ticket as soon as possible, but at the same time they explain that due to the pricing method - according to which the cheapest tickets are sold first and over time the price climbs up to the maximum price - today it is more difficult to find flights at minimum prices, since the supply is lower than usual.

"Globes" investigated whether there is a significant difference between fares for short notice dates, compared with dates further away. According to a check on the El Al website, the minimum price for a ticket to New York next month will cost $893 one way. During Passover 2025, the fare is $890 one way - that is, the difference is negligible. It should be stressed that on dates when demand is higher, fares naturally rise.

El Al has recently been subject to an investigation by the Israel Competition Authority, which is probing whether there has been a violation through use of "unfair" prices (one of the sections of the Competition Law regarding the abuse of a monopoly position), due to claims of dramatic fare increases. The Competition Authority's investigation is a complex matter and may take a long time, since it is based on a large amount of data and parameters that affect the pricing method of airline tickets. With the disclosure of the Competition Authority's probe, El Al claimed to have actively interfered with its systems in order to cut fares.

Nevertheless, El Al’s second quarter financial results showed record profit of $147.4 million, 2.5 times bigger than the $58.9 million profit in the corresponding quarter of 2023. Occupancy on flights in the second quarter rose to 92% from 87% in the second quarter of last year. The change in the price variations

After the outbreak of the war, El Al adopted a restrained pricing system that includes cutting the maximum price for each flight, without altering either the minimum price and the average price. Thus price variations have changed. In practice, this means that more passengers are forced to pay fares close to the average and higher than it, while, as soon as competition returned on certain routes, El Al returned to the normal pricing policy, which raised fares. At the same time, it must be taken into account that cancelations by the low-cost airlines since the war broke out has been making connection flights more costly. UK airline easyJet has announced the longest flight suspension (until the end of March 2025) by the low-cost carriers in the current wave of cancelations, and it seems that Ryanair is also extending its cancelations (until the end of October). This situation continues to make it difficult to fly to low-cost destinations, which are often used as stopovers for onward flights to the US.

Moreover, there is no certainty that the US airlines will resume flights on the dates announced, with estimates in the industry that the chances of this are low, since these large airlines that consider their next steps cautiously and subject to intelligence-based civilian risk management systems.

Nechama Ronen, chairperson of Maman Group, which provides services to international airlines in Israel, says, "From the point of view of the US airlines, Israel has become an unstable region that is difficult for them to manage compared with alternatives. It is very difficult for these companies to start and stop a route, open and close a booking system and charge and refund customers. For them, the easiest thing is to transfer the plane to an alternative route with a stable revenue cycle, where it maximizes its profits."

Published by Globes, Israel business news - en.globes.co.il - on August 19, 2024.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2024.

El Al plane credit: Shutterstock
El Al plane credit: Shutterstock
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