El Al Israel Airlines (TASE: ELAL) has again broken its own record, posting a net profit of $147.4 million for the second quarter. This represents a massive 84% increase over the $80.5 million profit for the first quarter, which itself was the airline’s best ever quarter until now. In comparison with the second quarter of 2023, the growth in profit in even greater: 2.5 times the $58.9 million profit posted in that period.
El Al’s revenue in the second quarter of this year was $839 million, 33% more than the $630 million revenue recorded in the second quarter of 2023. Revenue in the first quarter of this year was $738 million. The company says that the revenue growth was partly thanks to an increase of $29 million in its cargo business (in fact doubling revenue from that source), but of course the bulk of it came from passengers.
The sharp improvement in El Al’s results comes against a background of much higher prices for last minute tickets. With so many foreign airlines cancelling their flights, travellers to and from Israel find themselves facing a near monopoly. El Al’s seat occupancy rose to a level that even the company itself describes as exceptional: over 92%, which compares with 87% in the corresponding quarter of 2023. Revenue per available seat kilometer (RASK) rose by 24% in comparison with the corresponding quarter, while available seat per kilometre (ASK) rose by 8%.
"Open skies" concept proves fragile
El Al is of course aware of the criticism of the rise in its fares, but it has explained time and again that the rise is only in prices for last-minute tickets, and recommends the travelling public to book flights as far ahead as possible. When other airlines cancel flights from one day to the next, however, booking ahead is of course not possible. El Al also claims that it has taken action to curtail the rise in fares.
El Al’s cash flow from regular activities in the second quarter was $391 million, 3.3 times the $119 million cash flow in the corresponding quarter.
Largest ever procurement
The airline has officially announced the signing of "the largest agreement in its history", whereby it will buy up to 31 Boeing 737 MAX aircraft, for up to $2.5 billion. "This deal represents a further step in the realization of our strategic plan, and will support expansion of our destinations map, greater frequency of flights to existing destinations, and an advanced flying experience," the company said.
The agreement consists of the purchase of twenty 737 MAX aircraft with an option on a further eleven. The new planes will replace El Al’s 737-800 and 737-900 aircraft. Delivery will begin in 2028.
Switch to positive shareholders’ equity
El Al has managed to wipe out its deficit on shareholders’ equity. At the end of the second quarter of this year, its shareholders’ equity was $201 million, which compares with a deficit of $91 million at the end of the previous quarter and of $209 million at the end of last year. The improvement stems from the company’s high net profits, and also from a $140 million equity offering and the exercise of warrants to the tune of $39 million.
The airline has also cut its net debt to $611 million, from $1.4 billion at the end of 2023 and $2 billion at the end of 2019.
El Al's share price is currently up 1.77% on the Tel Aviv Stock Exchange.
Published by Globes, Israel business news - en.globes.co.il - on August 15, 2024.
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