Travel trends: Does the early bird get the worm?

How far in advance does El Al believe people book flights?

By
September 8, 2019 07:33
Travel trends: Does the early bird get the worm?

File photo of an EL AL Boeing 777 aircraft at Ben Gurion International Airport near Tel Aviv, Israel July 14, 2015. REUTERS/Nir Elias/File Photo. (photo credit: REUTERS/NIR ELIAS)

We are still in the dog days of summer with very warm days and, thankfully, cooler nights. The kids are back in school, the High Holy Days will soon be here and the media are replete with airlines and their new routes. El Al is investing hundreds of thousands of dollars in promoting its new destinations. I’m not talking about Chicago, which El Al will start operating next March, nor Dublin and Dusseldorf, which will commence flights at the end of May but Tokyo, scheduled to fly three times a week starting six months from now.

Yes, in six months El Al will take to the skies three times a week with nonstop flights to Tokyo. Complete with early bird discounts, an anime campaign is inundating social media. Anime refers specifically to a Japanese-disseminated animation style often characterized by colorful graphics, vibrant characters and fantastical themes.

How far in advance does El Al believe people book flights? Friday night, July 24, 2020 will be the opening ceremonies of the Tokyo Olympics. A TV audience of more than 40 million is expected, and El Al must believe that Israelis will arrive in droves to attend. One would think that if they are marketing their flights so far in advance, there would be a plethora of summer Olympic packages available. One would be wrong.

Perhaps El Al is putting all of its yen into hoping Israeli businessmen will flock to the largest trade fair next year: the stimulating Data Center & Storage Expo planned for next April. I am adamant that few Israelis will opt to attend the lively Tokyo International Funeral & Cemetery Show. Sadly, the one show I would have loved to attend, the International Auto Expo, takes place before El Al starts flying.

Keep in mind that unless you’re flying for a holiday or a business conference, it’s advisable to purchase international flights four to five months in advance. It takes a lot more preparation to plan an international trip, and that includes booking your tickets further in advance. International flights are generally cheaper when you buy earlier, but the real savings comes when you buy well in advance when you already know the demand will be high.

Are you sad that you stayed home this summer when everyone you know took off? Then decide you want to go abroad next spring and work hard to close the dates now. With fall on the horizon, I’ve received countless requests to purchase tickets in the dead of winter to the US. I’m not talking the first week of January when both the Christian tourists and Israeli businesspeople are flying. We’re talking late January, early February, when surprise, surprise, there’s not a huge demand to fly to the US. I tell my clients to be patient, it’s just too early, and airlines may come out with winter specials but not for several months. I can promise them they will find space at a very reasonable price.

DESPITE THE opening of new long-haul routes to the US and Japan in 2020, El Al CEO Gonen Usishkin recently made an interesting comment reiterating that Europe remains its strongest market. He said, “28,000 of El Al’s 32,000 annual flights are to Europe. This is a very important market, and we won’t neglect it. We’re not talking about profitability at the level of the individual route. I feel comfortable with Europe, which includes markets that are at the core of our strategy, such as London and Paris.” While I can’t argue with his numbers, his long-term strategy remains flawed. El Al’s flights to Europe are buffered and buttressed by dozens of European carries, to say nothing of low-cost and ultra-low-cost carriers.

Easy Jet and Wizz Air, to name two of the airlines that have achieved admirable market penetration, have taken serious business from El Al, and their market share will only continue to grow. El Al’s labor force is much larger than at these younger carriers, and its profitability will always be at risk. El Al’s response to this competition has been to unveil different pricing mechanisms on all of its European routes named “Lite,” “Classic” or “Flex.”

Consumers can decide in advance if they prefer a nonrefundable flight with no checked bag or a pre-reserved seat. Want to fly lightly, enjoy a low price and save precious time at the airport? Buy the Lite ticket. Want to fly as you are used to, with the same benefits as before? Classic is your best choice. Fly often and want to be flexible, while enjoying all of our services and options? Choose Flex. While there remains a loyal client base that prefers to fly El Al, the vast majority have migrated to even lower fares on alternative airlines.

It’s the North American market where El Al has the ability to make big profits that changes are afoot. American Airlines, which left Israeli back in 2015 after deciding flying to Philadelphia wasn’t profitable, has changed its strategy and in just 12 months, September 2020, will operate a nonstop flight between Dallas and Ben-Gurion Airport.

As Dallas is AA’s largest hub, their idea is to use it as a transit for connecting flights to the US, Mexico and Central and South America. Like El Al’s flights to Chicago, it initially will only be three flights a week. This is not enough to impact airfares but does add another chink in the duopoly of Delta and United as the sole US carriers flying to Israel. More airlines offering passengers a range of options benefits price, service and quality. Like United Airlines’ recent introduction of Washington, DC, to the mix, the more cities that are served from Israel the more El Al’s hold weakens.

American Airlines will be getting 750,000 euros from the Tourism Ministry to fly from Dallas. This grant, paid after one year in operation, is designed to spur incoming tourism. Aside from its hub, the incoming segment of Christian tourism will be heavily seduced. That alone should make it a profitable route for AA, which it is hoped, will turn it into a daily flight. Being part of the One World alliance along with British Airways, Iberia, Royal Jordanian and Cathay Pacific, which already fly into Israel, will add to its appeal. These airline alliances are compelling, and for the past decade United Airlines has been able to gobble up the North American market due to its interline agreement within the Star Alliance.

AIR CANADA, Austrian Airlines, Brussels Air, Lufthansa and Swiss are part of this mini alliance with United, allowing clients to mix and match any of these seven airlines with no difference in fare. Flying into Toronto and out of San Francisco on two different airlines is a cinch. Stopping over in Germany and then flying to dozens of cities in North America allows a myriad of options that no other alliances offer. The fares and prices are identical, allowing easy-to-build, complicated itineraries with several airlines. Both leisure and business clientele show great loyalty to this concept.

Delta Airlines, now flying twice daily to JFK, is part of the third airline Alliance-Sky Team. Yet it’s never been able to create a joint venture with its European partners on the level that the Star Alliance created. British Airways in the One World Alliance has never brought such a joint venture to the Middle East either. Other than utilizing American Airlines on flights from London or Iberia from Madrid, it offers no other rational combinations.

There is a compelling reason that El Al continues to add new destinations on flights to North America. The competition that arose with the open-skies policy and the entry of low-cost airlines have wreaked havoc on air fares to Europe. This decrease in prices of flights to the US will begin to accelerate, and while it won’t approach the rock-bottom fares now available when flying to Europe, it will become cheaper.

According to data from the Israel Airports Authority, the first seven months of 2019 saw over one million in passenger traffic to the US. In July, there was a nearly 20% increase in flying to the US compared to July of the previous year. Keep in mind that those carriers which fly nonstop to cities in the US are the main beneficiary. The fact that Turkey was the leading destination for Israeli flights this summer is because the vast majority of passengers continue on to other destinations, mostly in the US.

Virgin Atlantic is commencing flights to London at the end of this month. It will create competition for British Airways and El Al on that route but it’s the trans-Atlantic routes that will immediately have an impact. There is a large demand for tickets with a stop in London on the way to or from the US, and BA and AA had the traffic to themselves for a very long time. Interestingly, Delta Airlines will be a beneficiary. As a partial owner of Virgin Atlantic, Delta will operate code-shared flights to London. The passenger will then be able to fly Virgin Atlantic to the US and return on a nonstop Delta flight from JFK. Accrual of miles in the Delta frequent flier program is another benefit.

Bottom line: The North American market over the next 12 months will see major additions in carriers and reduced fares to benefit the consumer. Just like Asia has seen airfares drop substantially with the entry of Chinese airlines, more and new destinations in the US will have the same result. No matter how many Dreamliners El Al adds to its fleet, it simply cannot add more cities, even if the Tourism Ministry dangles grants in its face. The European airlines are not giving up on North America. Be it Alitalia or Lot, they too realize the real profit are on those trans-Atlantic routes. Ask Aeroflot, which has been increasing market share exponentially as Moscow is used as a transit hub to North America.

So hold off buying those tickets for next year awhile longer and see how it shakes out.

Remember, the early bird may get the worm, but being first is not always the best.

The writer is the CEO of Ziontours, Jerusalem. For questions and comments email mark.feldman@ziontours.co.il.


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