No doubt you’ve heard the breaking news that El Al sent to thousands of its
devoted customers last week: Frequent fliers can use points and $120 to fly to
Larnaca, Cyprus, provided they travel in the next six weeks. Yes, this island of
democracy smack-dab in the middle of the Mediterranean Sea, known for its
beaches and mountains during the summer, is being promoted by El Al in the dead
of the winter.
Perhaps you saw the touching photo that peppered media
outlets, of El Al pilots lined up on the tarmac of Ben-Gurion Airport in the
shape of an airplane? Along with El Al’s huge promotional campaign, the company
has invested $320 million in purchasing six new planes.
Perhaps El Al
finally realized it needed a brand new Jumbo, like the Boeing 787, which could
save money in operations and finally spruce up its business seats in the most
profitable arena, flights to and from North America. Or maybe the airline had
finally broken the Boeing monopoly and purchased Airbus aircraft at a huge
savings? In your dreams, El Al proudly announced. It had purchased not one, not
two, but six spanking- new Boeing 737s, which are touted as the most advanced
narrow-body aircraft in the world.
Forget about competing on flights to
London. Bury the thought that the Far East is where passengers will want to fly.
Don’t bother focusing on the most profitable routes to New York. These planes
will operate on El Al’s short- and medium-range routes to Europe. Look out,
Larnaca; move over, Budapest – El Al is coming your way! With a theme song
inaptly titled “They’ll Always Wait for You,” senior executives at El Al must
have been eating some bad airline food to have made such a
Nobody is waiting to fly to Cyprus in the winter.
$320m. that El Al borrowed from a consortium of banks and individuals will offer
16 business-class seats and 156 seats in economy class. Boeing attests that the
slim and lightweight economy seats were produced with new technology and with
ergonomic cushions for maximum comfort, and that all passengers will have
electric outlets and USB connections near their seats. This means that when you
take that hour-long flight to Larnaca or three-hour ride to Budapest, you’ll
find ways to pass the time more quickly.
As El Al president and CEO
Eliezer Shkedy was quoted as saying, “the arrival of El Al’s new 737-900ER
aircraft marks the high point of the airline’s re-equipping and fleet renewal
impetus. The purchase positions the airline at the forefront of international
technology and is expected to create a significant breakthrough in passenger
service and the flight experience.
Our investment in the new modern
Economy Class seats and in a sophisticated entertainment system that will be
launched in the coming months is in line with the target we set for ourselves –
to provide the best product and most advanced service for passengers and thus
retain El Al’s status as the most preferred airline for flights to and from
I know that Mr. Shkedy, former head of the Israel Air Force, is
a brilliant tactician, schooled in the art of both diagnosing and solving
problems. It’s his strategy that boggles my mind.
When the transportation
minister inaugurates the expansion of Ben Gurion’s Terminal 1, expressing
delight at how many low-cost carriers have entered the skies over Israel, and
when low-cost carriers such as Easy Jet expand their flights to and from Israel
by adding Rome to their scheduled destinations, on what basis does El Al believe
economy- class passengers will elect to pay up to 50 percent more just to plug
in their iPads on the plane? Let’s make this crystal clear: The vast majority of
leisure clients flying to nearby locations are looking first and foremost at the
fares. Yes, they want security; of course they want safe aircraft with superb
facilities. But at the forefront is the most basic inquiry: What will it cost?
The sole reason Easy Jet in Rome grabbed over 50% of the market from Alitalia is
its air fares.
The reason Israir dropped the frequency of its flights to
Rome this winter was Easy Jet. So on what cloud are El Al executives hanging
their hopes that Israelis and tourists will choose to fly with them? The basic
nucleus of what El Al is today precludes it ever succeeding in competing in the
low-cost market. These new planes may save El Al up to 10% in fuel, but the
salaries and compensation for both its ground and air personnel far exceeds any
of the low-cost carriers.
Just look at the laughingstock that El Al has
become over the last six months in trying to entice an investment group to pony
up $75m. The group’s terms were simple – just get the airline’s senior
management and the workers committee to agree to severe cuts, and the spigot
would turn on. Did Shkedy go to his staff and union representatives, explain how
dire their situation was, and set an example by retiring senior personnel? Not
at all. The workers and management eventually failed to reach an agreement, and
the investment group withdrew its offer.
This situation reminds me of the
condemned prisoner who, when approaching the electric chair on the day of his
execution, is informed that he’s simply too fat to sit in the chair.
warden gives him a threemonth respite with strict orders to diet so he can
Three months later, he comes back looking more corpulent than
before. When the exasperated warden asks him why he couldn’t follow those simple
instructions, the wizened convict with his gap-toothed smile simply retorts, “I
had no motivation.”
Why did the marketplace so naively believe that El
Al’s management and workers would agree to their own dismissal? Everyone is
aware how much fat there is in El Al. On the record and off, it’s stated that El
Al must make serious cuts to survive, but there’s no incentive whatsoever. The
airline can continue to fly and flounder, wasting both capital and goodwill, for
quite some time. No Israeli government will let El Al go bankrupt; the idea of
not having an Israeli carrier is anathema to political parties on both the left
and the right.
El Al is seriously overstaffed.
tenure, having no fear of being fired, do little to better the company. Too
often, new hires are brought on board based not on their talents, but on whom
they know inside the company. CEOs come in brimming with optimism and new plans,
only to be pilloried by the apathy of executives who know their own jobs are
secure and that they can outlast the CEO.
Even the well-meaning and
hardworking employees, of which there are hundreds, receive little direction in
how to cope with the ever-changing marketplace.
Look at an airline like
I’m not even going to elaborate that it made $1.37 billion in the
last quarter. Yes, over a billion dollars, an amount that was the envy of the
airline’s peers. My point is that, as in most intelligently run airlines,
Delta’s software is designed to check diligently and constantly the fares of
competitors. United Airlines raises its fare; Delta will react in minutes. US
Air raises the price of a second checked bag on international flights; Delta
responds in hours.
So last month, when Delta decided that the
Transatlantic market between Tel Aviv and New York looked weak for the winter
months, it came out with a $999 special valid for travel between December 1 and
March 31. United Airlines matched it later that same day, and El Al also
realized it had no choice but to follow suit to compete with the other two
airlines that fly nonstop between Tel Aviv and JFK or
Nonetheless, I noticed in my office and among my colleagues that
a large number of the leisure passengers who were excited about this reasonable
winter rate ended up purchasing tickets on United or Delta. At first I thought
El Al was engaging in some type of bait-and-switch maneuver – advertising a low
fare to entice consumers, only to force them to pay more for the same product.
Further inspection, however, revealed the real reason: While United’s and
Delta’s tickets were valid for three months, El Al had elected to limit its
special to only one month! For what unholy reason would it do something like
that? Did nobody at El Al bother to look at what its direct competitors were
doing? Or did it simply decide to match the price without bothering to review
the conditions? When I pointed out the absurdity of the company’s actions, El
Al’s response was deafening in its silence.
Now, for those 16 of you in
the business-class seats, who do fly business class to the locations that El
Al’s new planes serve, you will indeed have a better flying experience than
passengers on El Al’s competitors. Recent reports have lauded how comfortable
the service is; how superior it is to the other airlines flying to these nearby
cities. Perhaps El Al should make the entire plane business class? Sadly our
market is not large enough to warrant such a product – which is why filling
those 156 economy-class seats has failure written all over it.The writer
is the CEO of Ziontours, Jerusalem.
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