El Al posts heavy Q1 loss

El Al, photo: Sivan Farag

The Israeli airline did not manage to translate higher quarterly revenue into a better bottom line.

El Al Israel Airlines Ltd. (TASE: ELAL) released troubling first quarter financial statements today. The airline posted a loss of $44 million for the quarter, which compares with a loss of $33 million in the corresponding quarter of 2017. Among the reasons for the loss, it mentions a rise in the price of jet fuel, and weakness of the US dollar. El Al recorded a tax benefit of $13 million in the quarter, which to some degree offset the loss.

El Al states that it is experiencing a substantial rise in the number of attempts by hackers to disrupt its operations, which meant that it spent heavily on data security, employing external consultants to make its computer systems more robust. El Al does not quantify its expenditure on cybersecurity, but the unusual disclosure means that it is something that is of concern to the company and to which investors should pay attention.

El Al's revenue in the first quarter of 2018 was $464 million, which compares with $417 million in the corresponding quarter of 2017. The airline did not manage to translate the rise in revenue into improved profitability. It posted an operating loss of $53 million, which compares with an operating loss of nearly $30 million in the corresponding quarter.

El Al announced this morning that it would stop paying travel agents and tourism package wholesalers a 5% commission on ticket sales. The change will come into effect on June 1, 2019. The company cites the greater competition it faces from Israel's open skies aviation policy, and changes in consumer behavior, among them a switch to online ticket purchases. El Al says that the measure will have an impact on its financial results, but not a material one in comparison with its sales turnover. Lufthansa and British Airways are among airlines that have preceded El Al in taking this step, although in the past El Al stressed the importance of sales commissions in maintaining its good relations with travel agents. 

El Al's shares price has fallen steeply on the Tel Aviv Stock Exchange this morning.  

Published by Globes [online], Israel business news - www.globes-online.com - on May 29, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

El Al, photo: Sivan Farag
El Al, photo: Sivan Farag
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