El Al looks west to counter competition

Carrier narrows Q1 net loss by 33%.

May 25, 2006 06:56
2 minute read.
El Al looks west to counter competition

el al plane 88. (photo credit: )


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El Al Israel Airlines narrowed its losses in the first quarter even as it looks to start direct flights to the West Coast of the US in response to the increased competition it faces beginning this summer. "We are seriously considering flying five weekly not stop flights to Los Angeles, using a Boeing 777," El Al chief executive Haim Romano, told The Jerusalem Post Wednesday, following the company's earnings release. "The dramatic increase of competition and the rise in fuel prices are the biggest challenges we face. We need to be more efficient and think out of the box to earn the loyalty of our customers." Romano said rising fuel costs and changes in its accounting for engine maintenance expenses were the main contributors to the $12.4 million net loss the company the company reported for the quarter. The loss, however, was 33% narrower than the $18.5m. loss incurred in the parallel quarter last year. The increase in the cost of fuel added $18m. to expenses after hedging actions, the company said. Revenues grew 17% from last year to $372.5m., boosted by an increase of 21% in the number of passengers El Al carried in the quarter, and approximately 5% more cargo. Despite the higher passenger count, the company has come under increasing pressure to maintain its market share as new airlines have started flying to Tel Aviv and a number of existing operators increased their capacities. While the company said it increased market share to Ben-Gurion Airport by 1% in the quarter, the Israel Airports Authority (IAA) reported last week that increase did not continue into April. IAA figures showed El Al's market share dropped in April from 40.9% last year to 36.4% this April. The company's competitors in the US market - Israir on the new York route and Delta, which started flying to Atlanta in April - were the main airlines to gain from El Al's drop, along with Air France, which also saw a market share increase from year to year. Air France doubled its capacity by introducing a second daily flight to Tel Aviv in April. Romano said El Al would combat this trend by introducing more products, increasing capacities and adding more routes. In addition to Los Angeles, he said El Al also was considering adding flights to Hong Kong and Bangkok. Western European destinations, he noted, were now saturated with El Al and charter airlines Arkia and Israir operating most of the popular routes, and with low cost carriers such as Hapagfly and Air Madrid having entered the market this year. El Al shares dropped 4.2% to NIS 3.50 in Tel Aviv following the earnings release.

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