El Al Israel Airlines Ltd. (TASE: ELAL) is preparing to receive a fleet of new Dreamliner 787 jets, to be purchased at a cost of more than $1 billion. The company today reported that it had signed a 15-year $125 million agreement with a foreign international company for obtaining support and logistics services for the planes. Under the agreement, the foreign company will provide El Al with an inventory of parts in Israel supplied from the foreign company's logistics centers in Israel and overseas, as well as repair and renovation services for the parts.
El Al has an option to withhold a number of airplanes that it purchased from the services agreement, subject to the terms set forth in that agreement. In addition, El Al also has an option to terminate the agreement, starting in its fifth year. El Al is scheduled to receive its first Dreamliner in August this year, the second in October, and the remaining planes later, with all of them being delivered by the end of 2020.
"The largest procurement"
The deal with Boeing, which El Al CEO David Maimon previously called "the largest procurement in El Al's history," includes the purchase of 16 Boeing 787-8 and 787-9 Dreamliners, engines, and spare parts. Payment will be made for each plane when it is delivered, minus an earlier 30% down payment, subject to the terms of the deal. The airliners are slated to gradually replace El Al's old Boeing 747s and 767s, and will be used for medium-length and long flights.
The El Al share was down 1.3% today and 5% in two days, following the oil price rises in recent days. The company's market cap is NIS 1.5 billion, after quadrupling its value over the past three years.
Controlled by Knafaim Holdings Ltd. (TASE: KNFM), in which the controlling shareholders are husband and wife Tami and Dedi Borovich and Poju Zabludowicz, El Al has benefited in recent years from the steep drop in oil prices. At the same time, the company has been struggling against a wave of foreign airlines introducing new routes from Ben Gurion Airport to various destinations around the world and offering cheap flights. El Al's revenue remained steady at $2 billion in 2016, while its operating profit sank 35% to $110 million and its net profit was $80 million.
Published by Globes [online], Israel Business News - www.globes-online.com - on May 16, 2017
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