El Al profit slumps as low-cost competition bites

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

El Al CEO: The company faces growing competition from low-cost airlines.

El Al Israel Airlines Ltd. (TASE: ELAL) today published its financial results for the fourth quarter of 2017 and the entire year. The company's net profit plummeted from $80.7 million in 2016 to $5.7 million in 2017. The airline's revenue rose from $2.038 billion to $2.097 billion, a 3% increase, and the number of passengers was up 2.4%.

El Al's market share fell from 32.6% in 2016 to 28.5% in 2017, while the number of passengers moving through Ben Gurion Airport jumped 16% to 5.6 million.

The airlines operating expenses were $110 million higher in 2017 than in 2016, among other things because of higher salary expenses, which were affected by the strengthening of the shekel against the dollar, labor agreements, and a provision for bonuses for the preceding year. Fuel expenses rose because of higher jet fuel prices, higher taxes, and other reasons.

Operating profit totaled $29 million in 2017, compared with $110.6 million in 2016, while pre-tax profit reached $8.7 million, compared with $93.4 million in 2016.

El Al said that despite the fall in its profit, the company was generating a high positive cash flow, and its liquidity continued to be high. Cash flow from current activities totaled $284 million in 2017, compared with $243 million in 2016; EBITDA amounted to $197 million, compared with $287 million in 2016; and El Al's balance of cash and deposits amounted to $286 million as of the end of December.

The company's revenue totaled $512 million in the fourth quarter of 2017, compared with $461 million in the fourth quarter of the preceding year. El Al posted a $29.7 million net loss in the fourth quarter, compared with a $2.4 million net loss in the corresponding quarter in 2016

El Al CEO Gonen Usishkin said, "The company faced growing competition in the Israeli civil aviation market in the 2017 as a result of the substantial increase in the number of seats on flights by foreign airlines, particularly the low-cost airlines. Despite the challenging business environment, the company posted 3% revenue growth, while its expenses grew primarily as a result of changes in the shekel-dollar exchange rate, which affected both salary expenses, and a rise in fuel prices and other expenses.

"El Al is in the midst of a strategic process of adapting the company to the changes necessary in order to maintain its competitive status and continuing positioning as the leading player in the Israeli civil aviation market: procurement of new advanced Dreamliners, which we regard as a factor that changes the rules of the game for the company, upgrades the passenger experience, and saves on the company's operating expenses; expanding the network of routes in North America - Boston, Miami, and San Francisco - and increasing the frequency of El Al's flights to its destinations; and investment in the digital theater in order to substantially and improve the airline in this area, and in Internet on airplanes. In addition, we are still improving our operational accuracy, fortunately with great success.

"We are also in the midst of changing the format of our flights to the company's destinations in Europe in order to devise a solution vis-a-vis low-cost flights, which are gaining an increasing share of passenger traffic at Ben Gurion Airport. In this framework, we have consolidated the company's brands in Europe under the El Al brand name in order to improve the customer's experience and later achieve operational efficiency. At the same time, we are maintaining our business class for our loyal business customers. The new model enables El Al passengers flying to Europe to fly at a worthwhile price and choose the flight package suitable to their needs, with complete transparency."

Published by Globes [online], Israel Business News - www.globes-online.com - on March 21, 2018

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

El Al, photo: Sivan Farag
El Al, photo: Sivan Farag
Microsoft campus in Herzliya  credit; Eyal Izhar Microsoft: Exempt Israel from AI-chip export restrictions

Israel is among countries mentioned in a blog post by Microsoft vice chair and president Brad Smith criticizing the restrictions.

Paz gas station credit: Tali Bogdanovsky Gasoline prices in Israel to fall Saturday night

The maximum price of government price controlled 95 octane gasoline at self-service pumps in Israel will fall on Saturday at midnight March 2, 2025, by NIS 0.08 per liter to NIS 7.23 per liter.

Tel Aviv credit: Shutterstock Tel Aviv master plan sees 600,000 residents by 2035

The Tel Aviv District Planning and Building Committee has approved for deposit the TA/5500 master plan for Tel Aviv-Yafo.

Mizrahi Tefahot Bank  credit: Eyal Izhar Mizrahi Tefahot to pay huge dividend on record 2024 profit

The bank reported net profit of NIS 5.5 billion last year, up 11% from NIS 4.9 billion in 2023.

Sheba, Tel Hashomer Hospital Photo: Tamar Matsafi Israel's Sheba climbs in "Newsweek" world hospital top ten

Last year "Newsweek" ranked Sheba Medical Center in ninth place and previously it was in tenth place.

Cyberattack  credit: Shutterstock Israel second most targeted country for cyberattacks

The report by Radware found that Israel suffered 1,550 cyberattacks in 2024, second only to Ukraine which suffered 2,052 attacks.

BIG Fashion Glilot credit: Dror Marmor Israel's biggest mall opens Thursday

BIG Fashion Glilot strip mall is in Ramat Hasharon's new office park, adjacent to Cinema City Glilot.

Tesla Model Y credit: Shutterstock Can Tesla stage a comeback in Israel in 2025?

After taking Israel by storm four years ago, Tesla has gradually lost market shares to Chinese rivals but this trend could change this year.

Ghost jobs illustration: Tali Bogdanovsky 10% of Israeli tech vacancies are ghost jobs

Ethosia CEO Eyal Solomon says the proportion of "ghost" jobs - vacancies that have been advertised but not filled and continue to appear on the company's website - has jumped dramatically in recent years.

Prime Minister Benjamin Netanyahu and Transport Minister Miri Regev credit: Marc Israel Sellem Jerusalem Post Jerusalem Red Line extension awaits ribbon cutting

Opening the light rail extension has been delayed while a date is found for a ceremony attended by Prime Minister Benjamin Netanyahu and Transport Minister Miri Regev.

Tel Aviv light rail Light rail fares in Israel jump 33.3%

Bus fares will also rise 33.3% after the 2025 budget is passed.

Quantum Machines founders credit: Eyal Izhar Israeli co Quantum Machines raises $170m

Sources say that the company's valuation, which before the latest round was $520 million, has now risen to $670 million.

Pay cuts illustration: Shutterstock Treasury plans pay cuts for doctors, teachers, and civil servants

The move is intended to ensure that the budget savings target of NIS 5 billion shekels in 2025 is achieved, as part of efforts to reduce the state budget deficit.

Shekel credit: Shutterstock Vladirina 32 Shekel weakens after BoI rate call

Poria Financial Planning chairman Or Poria: There is growing uncertainty over the collapse of the hostage deal, and the increasing probability of renewed fighting in the south.

Daniel Aronovitz credit: Joseph Laor Insight Partners: $6b and still investing in Israel

Insight Partners newly appointed Israel partner Daniel Aronovitz tells "Globes" about the US firms plans for Israel and reveals the huge extent of past investment.

Bank of Israel Governor Amir Yaron credit: Eyal Izhar, Tali Bogdansky BoI Governor: We hope for two rate cuts in second half

Bank of Israel Governor Prof. Amir Yaron tells "Globes" he remains concerned about inflation, higher demand than supply, and real estate balloon loans.

Twitter Facebook Linkedin RSS Newsletters גלובס Israel Business Conference 2018