El Al posts $76m. net loss in 2009

Global financial crisis, Operation Cast Lead weaken passenger revenue.

March 28, 2010 23:12
3 minute read.
An El Al Boeing 767-200 (El Al)

el al 311. (photo credit: El Al)


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Losses at El Al Israel Airlines, the nation’s national carrier, nearly doubled last year as the global financial crisis and Operation Cast Lead reduced passenger and cargo revenue.

The net loss for 2009 totaled $76.3 million, compared to the net loss of $41.9m. in 2008. The bad news sent El Al shares down 4.1 percent on Sunday to NIS 1.091, the most since September 30.

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“In 2009, El Al had to cope with the many challenges it faced as a result of Operation Cast Lead, the world financial crisis, and heavy security costs. The company had to adjust its activities and prepare itself for the complex situations that arose,” said Amikam Cohen, chairman of the board of directors at El Al.

“El Al adapted itself to the dynamic reality of the international markets, and shall continue to do so in 2010 as well. We continue our program to make real-time adjustments, all this in order to maintain El Al’s status as a leader in the market,” he said.

Cohen added that El Al’s management was preparing a new strategic plan aimed at preparing the company to face the challenges of the near future, to provide solutions to changes in aviation in particular, and to the challenges that face the company in general. The plan is expected to be presented soon.

“El Al is not falling apart. The carrier is going through a tough time similar to its competitors but it still has a nice cash flow. The difference is that its chief executive changed only three months ago and he will have to figure out how to narrow losses and increase revenue,” said an industry source. “There is a lot of labor unrest in the company because of the current financial situation and fears of streamlining actions.”

El Al ended the year with a cash balance of $114m., carried out its entire investments plan and upheld all of its obligations laid out in the carrier’s work plan. This included investments in fixed assets totaling $178m. and repaying long-term loans of $75m.

“Since I took up my position three months ago, we have conducted an in-depth analysis together with an international consultancy firm specialized in the aviation industry. We have taken a number of immediate steps and we are in the midst of introducing changes and actions regarding our commercial approach, risk management and quality of services, in an effort to develop sources of income and new cooperations,” said Eliezer Shkedi, El Al’s new chief executive. “In parallel to the multi-year strategic plan, I intend to stop the trend and make 2010 a turning point by cutting costs, entering new markets and developing engines of growth.”

El Al’s revenues in 2009 fell 21%, to $1.6 billion, compared with $2.1b. in the previous year, mainly as a result of having to match ticket prices because of the drop in aviation fuel prices and the drop in passenger traffic at Ben-Gurion Airport. Cargo revenues declined by about 46% compared to 2008, as a result of air cargo slowdown at Ben-Gurion Airport and the drop in air cargo rates mostly because of the world financial crisis.

Fourth-quarter results showed that revenues dropped 11%, to $413.7m., on reduced passenger and air cargo traffic. The net loss for the fourth quarter of 2009 was $29m., compared to a loss of $10.1m. in the same quarter a year earlier. Cargo revenues declined 26%.

Last year, El Al increased its market share to 37.5%, compared to 35.7% in the previous year. The market share during the fourth quarter of 2009 increased by a similar percentage. The airline said its load factor in 2009 narrowed to 81%, from 82.3% in the previous year. The overall load factors of the foreign carriers at Ben-Gurion Airport totaled about 74.2%.

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