El Al chairman pessimistic on lower airfares

Amikam Ben Zvi credit: El Al Spokesperson
Amikam Ben Zvi credit: El Al Spokesperson

Amikam Ben Zvi tells "Globes" that limited operations by foreign airlines in Israel means demand for seats is high and supply is low.

The fallout from the war that broke out in October is felt in many areas of Israeli life and one of the main economic sectors affected is the aviation industry. At the start of the war almost all international airlines halted flights to and from Israel, although most of them have since resumed their operations to Ben Gurion airport. This left El Al Israel Airlines Ltd. (TASE:ELAL) as almost the sole operator with an 80% market share of international flights to and from Tel Aviv. This situation translated into a rise in airfares and a huge jump in El Al's fourth quarter profitability. Between its low-point in October 2023 and last week, El Al's share price doubled.

In the fourth quarter of 2023, El Al reported revenue of $678 million, up 21% from the corresponding quarter of 2022, and net profit of $40 million, up 370% from the corresponding quarter.

El Al's management led by CEO Dina Ben Tal Ganancia rushed to take advantage of the jump in the airline's share price and raised $170 million at the beginning of this week. El Al's controlling owner Kenny Rozenberg injected $30 million into the airline as part of the offering and he now holds a 46% stake in the company. Since the offering was announced, El Al's share price has fallen 16%, giving the company a market cap of NIS 1.8 billion.

In an interview with "Globes" after the offering was completed, El Al chairman Amikam Ben Zvi (73), a close confidante of Rozenberg, tries to predict what is expected to happen with airfares, and reveals some of the company's future plans. El Al currently has nearly 5,000 employees and operates a fleet of 47 aircraft flying to 55 destinations around the world.

Ben Zvi was one of the instigators of Rozenberg's investment in El Al at the peak of the Covid pandemic, when the company was caught in an existential crisis, from which it was rescued with the help of massive capital injections from Rozenberg and the state. In the past, Ben Zvi has served as CEO of various companies including Amidar, Hamashbir Lazarchan, and Nechustan.

"Kenny Rozenberg is very satisfied with his investment

How would you sum up the offering procedure?

Ben Zvi: "This was an exceptional offering, which raised $170 million in shares and options, which if exercised will inject $155 million into the company's coffers over the next two years. This in addition to the options that were issued in the past, with a potential to inject $32 million in the event that they will be exercised."

He says that the money that has been raised will serve several aims: initial payments for purchasing new aircraft that will be ordered from Boeing; repaying most of the loan put up by the controlling owner Rozenberg (totaling $70 million); and reducing El Al's equity deficit, which amounted to $187 million at the end of 2023. In the future, El Al hopes that the offering will help it join the prestigious Tel Aviv 125 Index, which would support more trading in the company's shares.

Rozenberg himself, who operates in the real estate sector (senior citizens homes), became the controlling owner when El Al was undergoing the biggest crisis in its history during the Covid pandemic. Today he is profiting from his investment, according to estimates by hundreds of millions of shekels, thanks to the recent jump in the price of the company's share.

Tell us how you got to know Rozenberg. When did you meet him?

"The connection between us began in 2008 and since then we have been friends and maintained good relations. He is very involved in everything regarding El Al and currently the CEO Ben Tal Ganancia and I meet with him in New York to catch up and discuss work plans."

Is he satisfied with his investment?

"Very and not only from the financial results but in the fact that he controls a company that is Israel's national carrier."

"Destinations have changed as well as consumer behavior"

On the burning question for the Israeli public of when airfares are expected to fall, Ben Zvi does not have any good news. He says that this mainly depends on the return of foreign airlines to operations at Ben Gurion airport because El Al is finding it difficult to cope with rising demand from the public.

"The foreign companies have not yet returned to full operations, and the supply of seats remains limited," he explains. "In recent months, we have seen a significant increase in demand, so that exceeds supply, and this affects the price that customers obtain. Since the beginning of the war, we have been working to strengthen the flight schedule and increase the supply of seats, and continue to conduct a strict price policy.

"It should be remembered that the entire aviation world experienced peak demand after the exit from the Covid, and the most difficult resource to obtain today is airplanes. The more foreign companies that return, the more supply there will be, and this is expected to enable more favorable fares for the Israeli consumer. We will be happy for the return of the foreign companies as soon as possible, as this will benefit everyone's routine."

How have you worked for the benefit of the public since the outbreak of the war?

"We joined the national effort to provide the 'air bridge', and we managed a strict fare policy, adjusting the way tickets are priced and even capping ceiling fares. We understand the complexity of the period and the uncertainty, which is why we have adopted a more flexible and easier cancellation policy."

Has there been a change in the public's conduct because of the situation?

"The mix of relevant destinations for Israeli passengers has changed due to the security situation. If in the past Turkey and Morocco were strong destination countries in the summer, today we see a significant change in the map of destinations for this period. In demand are nearby vacation destinations like Cyprus and Greece and even long-distance destinations like Japan (Tokyo), Thailand and the US. We take pains to adjust the mix of destinations and strengthen the flight timetable as far as possible to provide a response to demand. "Another change brought about by the period is in the consumer behavior of the customers when booking flights. In the first months of the war, bookings were made at the last minute, and they were affected by the uncertainty. Little by little we are noticing an increase in demand, while taking into account the limited supply. Customers who plan a vacation ahead and book in advance, will assure themselves places on flights at much more affordable prices, with the possibility of free cancellation up to 48 hours before the flight. This will provide peace of mind when it comes to uncertainty."

Published by Globes, Israel business news - en.globes.co.il - on April 5, 2024.

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

Amikam Ben Zvi credit: El Al Spokesperson
Amikam Ben Zvi credit: El Al Spokesperson
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