The winter of our discontent

The Travel Adviser: My theory is that El Al, being such a small airline in global terms, must use every advantage it can.

By MARK FELDMAN
Elal plane 311 (photo credit: Courtesy)
Elal plane 311
(photo credit: Courtesy)
I hear voices, actually quite often. So when I was with a half-dozen travel executives at a program promoting French tourism last week I overheard the following.
Some French official, Sacreblue, I believe, was speaking to some American bigwig, O’Riley, when I picked up this snippet: “I can’t look at them anymore; they’re such liars,” said the Frenchman.
“You don’t have to fly with them, but I have to deal with them every day,” the American nabob responded.
Realizing their conversation had been picked up on an open microphone, we travel executives at first agreed to keep their faux pas to ourselves. It was obvious to whom they were referring. Bullied and belittled, teased and threatened, coddled and cajoled, the subject of their frustration was, of course, El Al.
And like the American, I too have the pleasure of dealing with El Al each and every day.
A quick digression so you’ll understand my predicament.
Guess which airline that flies to Israel has the largest stock market capitalization base as of Friday’s close? Think it could be United Airlines, which still uses the Continental name on her two daily flights between Newark & Tel Aviv? Perhaps you think BA, which after all has merged with Iberia and offers four flights daily to both Madrid and London. My first thought was Lufthansa, which has incorporated into its portfolio, Swiss, Austrian Airlines & Brussels Air.
In fact the largest airline in terms of total stock market capitalization that actually flies to Israel is Delta, with a value over $7 billion dollars.
El Al’s market cap is all of $95 million dollars.
In fact, of the top 75 airlines, its ranks near the bottom at No. 67.
This ranking is partly a reflection of shifting global economic power. Air China leads the list and of the top 10 airlines by market value, six are in Asia. Only two (No. 8 Delta and No. 10 Southwest) are in the US; only one is in Europe, Ryanair. To be fair, the world’s most valuable company, ExxonMobil, is worth more than twice as much as all of the top 75 airlines. Astute readers will point out that not all airlines are publicly traded. Some glaring exceptions are Emirates Air & Qantas Airways.
My theory is that El Al, being such a small airline in global terms, must use every advantage it can. First and foremost, that means, in spite of her Zionist pedigree, routes should run primarily on an economic basis. Do I question their decision to cease flying to Sao Paulo, after touting the decision to open up South America? If asked, I would have advised them to focus on Buenos Aires, a city with both a larger population as well as more desirable among business travelers.
El Al’s competition is not her fellow Israeli airlines, Arkia & Israir. She has beaten down their threats over the years and should easily be able to walk all over them in the near future. Her immediate challenge is from the foreign airlines that fly into Israel, primarily although not exclusively the European airlines.
El Al cannot, nor should not try to compete with the low cost carriers like EasyJet and Jetair. They use one type of aircraft, have no union problems and their fixed costs are far less than those of El Al. Air Berlin has made deep inroads into their market, as well.
El Al needs to cut ground personnel dramatically; too many clerks doing too little work are cutting into their profits. Some of their representatives are truly innovative and need to be acknowledged.
El Al is the only airline from Tel Aviv flying nonstop to several cities. Bangkok, Beijing, Hong Kong, Bombay & Johannesburg can only be reached on a nonstop flight with El Al.
One would think that El Al would invest heavily in this advantage, with the best equipment possible and reasonable rates. In fact to most of these cities, EL Al does little to entice the flying public.
While the planes are completely safe and of course the security top notch, the flying experience itself leads to constant complaints.
Crowded seating, business class seats that haven’t been upgraded in many years, make repeat fliers strongly consider future flights on alternative airlines, even with the extra stop this will entail.
Korean Air and Turkish Air have benefitted greatly by promoting reasonable rates with excellent service in newer airplanes than El Al.
Several frequent fliers prefer to fly west to Europe rather than head east directly from Israel. Lufthansa and Air France are two of the biggest beneficiaries of El Al’s failures.
It’s when we get to the most profitable market, North America, that El Al will see future profits dwindle. Her competition here is fierce but fair. Air Canada, Continental, Delta & US Air all fly to cities throughout North America.
They don’t need to partner with other airlines inside North America as their networks stretch into almost every nook and cranny.
Not to be esoteric, let’s talk RASM. This industry metric, Revenue per Available Seat Mile, is a unit of measurement used to compare the efficiency of various airlines. One simply divides operating income by available seat miles. Generally the higher the RASM, the more profitable the airline will be. Because it is more encompassing than total revenue, RASM has been adopted by most airlines in preference to just passenger revenue.
This means selling $99 tickets to Paris is not the way to ratch up revenue. Selling $299 tickets to Moscow won’t fill the coffers. Airlines use complex computer systems written by highly trained software engineers to maximize revenue. Too many seats at fares too low result in less than maximum income. Conversely when a plane takes off with an empty seat that potential for additional revenue is lost forever.
Are you really telling me, El Al, that in our “Start up Nation” you’re incapable of hiring the brightest software people? The biggest source of revenue for any airline are those clients willing and able to fly in business class. In fact business class passengers are strenuously wooed by all the airlines that fly to and from Israel, especially on the North American routes. So while BA & Continental, US Air & Air Canada, to name just four, have beds that permit the weary traveler to stretch completely horizontal when flying business class, El Al remains with business class seats more suitable to the previous century.
In fact, the biggest complaint we receive from our business clientele is about El Al’s seats. They’re able to pay for business class; or like our politicians expect someone else to foot the bill, but their comfort on the plane is of paramount importance.
On short-haul flights, El Al has missed the opportunity of offering economy plus seats.
Air France, Alitalia, KLM & BA, to name just four, have redesigned their aircraft to lure the economy passenger into paying a bit more to fly a bit more comfortably. The result is extra income; there is a large pool of potential fliers who while they cannot afford business class, have no difficulty in forking out a few hundred dollars more to fly in this premium economy class.
One would think that El Al, being by the world’s standard one of the smallest airlines would find it easier to make changes quicker than their bigger competitors. The opposite has proved true.
So while El Al does reach out to the flying public to solicit suggestions, I call upon all the readers to come up with their own propositions.
El Al senior management read this paper on a daily basis. Put your mouse to your laptop, your pen to your paper and send in your ideas.
Never forget, El Al may no longer be the “national airline” of Israel now that’s it’s privately owned, but in the minds of most people it’s still a symbol of Israel.

Mark Feldman is the CEO of Ziontours, Jerusalem. For questions & comments, e-mail him at mark.feldman@ziontours.co.il.