Sources have informed ''Globes'' about the results of the El Al Israel Airlines Ltd. (TASE: ELAL) credit card tender. The airline plans to issue two types of credit cards: bronze and premium; the premium card will be expensive and prestigious. The bronze card, which mainly targets the general public, was won by Diners Club Israel, owned by Israel Credit Cards-Cal Ltd. (ICC-Cal) (Visa). The premium card was won by three credit card companies: Isracard Ltd., which will issue the credit cards through American Express; Leumi Card Ltd.; and ICC-Cal through Diners Club Israel.
El Al plans to start issuing cards during the first half of this year.
The credit cards will be offered to El Al's frequent flyer customers; the airline's frequent flyers club has 1.3 million members. The credit cards' main benefit will be a conversion ratio for converting purchases into frequent flyer points that will be much better than the current ratios offered by the credit card companies.
Sources in the credit card industry say that Diners Club Israel submitted an especially high bid for an exclusive win for the bronze card. In addition to a high conversion ratio, the company agreed to provide $10 million in financing for the advertising and marketing of the credit card.
ICC-Cal is willing to invest heavily in El Al credit cards because it hopes that the collaboration will greatly boost Diners Club Israel, which has been floundering in recent years. There were only 185,000 active Diners Club cards at the end of 2013, giving a 2% market share.
Credit card industry sources estimate that 100,000 credit cards can be issued, of which 80,000 will be bronze cards, giving Diners Club Israel a potential boost. For this reason, ICC-Cal, run by CEO Doron Sapir, agreed to give El Al a very generous proposal to win the tender.
El Al said, "El Al does not comment on commercial matters before they are completed."
Diners Club Israel said, "We do not comment on business matters."
A substantial proportion of credit card points are already used to buy airline tickets; an estimated 10% of credit cards' turnover is converted into El Al points. Therefore, if a credit card is issued that offers in advance an attractive conversion ratio, it might encourage many customers to use it to amass points. Industry sources estimate that the conversion to points will rise to 15% of credit card use. In addition, frequent flyer club members belong to higher socio-economic groups, and use credit cards heavily.
El Al is trying to leverage its brand to credit cards as other airlines around the world are doing.
Published by Globes [online], Israel business news - www.globes-online.com - on March 25, 2014
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