Post-COVID travel: Lower demand, lower prices, more competition for El Al

On Monday, Israel began a flight closure that prevents Israeli citizens and foreigners from leaving or entering the country.

El Al crew practices social distancing after landing in Perth to bring Israelis stranded in Australia back home (photo credit: EL AL)
El Al crew practices social distancing after landing in Perth to bring Israelis stranded in Australia back home
(photo credit: EL AL)
Even after air travel to Israel reopens, travel to and from Israel is expected to remain low for many months to come, said Ziontours Jerusalem CEO Mark Feldman.
On Monday, Israel began a flight closure that prevents Israeli citizens and foreigners from leaving or entering the country through Ben-Gurion Airport until at least January 31, and likely longer. However, as the country speeds through with its vaccination program, many Israelis are starting to dream about travel again.
“For now, people should just continue to dream. Most are not making plans,” Feldman said. “Bookings are very weak right now, and there is reason to be wary of making travel plans for the spring and summer.”
Air travel is still fraught with uncertainties, and countries are starting to introduce stricter flight requirements in efforts to contain the coronavirus. As of last week, Israelis will be required to test negative for COVID-19 within 72 hours prior to their flight, or they will be forbidden from boarding the plane. The US launched a similar protocol as of yesterday, and many other countries already have this requirement. Many countries also have mandatory quarantine requirements for arrivals.
However, this week’s airport closure has brought a renewed sense of uncertainty to airlines that were starting to hope that the end of the novel coronavirus crisis was in sight. El Al officials declined to speak publicly during the closure, Israir’s staff was unavailable, and Arkia’s web site is out of service at the time of writing.
“In 2019, at this point in the year, two months before the Passover holiday, we would have had about 1000 holiday flights booked already. This year, we have done 20.”
While advertised spring and summer airfares look cheap, Feldman advises people to be patient and not jump to book tickets far ahead. “If there is a situation where seats fill up quickly, the airlines will be able to open up more flights. The airlines have a lot of different options, and they understand that they will have to keep prices low in order to encourage people to return.”
Once travel opens up, Israelis will find that their travel map is completely different than it was a year ago, a European airline executive noted. “By the start of the summer season, five airlines from Arab countries will operate daily flights to Tel Aviv. If Israelis continue to flock to Dubai as they did in December, the UAE will become established as the leading destination for Israeli travelers.”
This is a significant development with wide-reaching consequences at home, he said. “El Al was one of the hardest-hit airlines in the world from the crisis, and the carrier was already burdened with high debt related to the acquisition of a new 787 fleet. The current airport closure could last a long time, and El Al’s new management will be under a lot of pressure. Meanwhile, by the end of March, two of the world’s most luxurious airlines – Emirates and Etihad – are going to be aggressively competing to connect Tel Aviv to their global networks. It will be very hard for El Al to compete when Dubai and Abu Dhabi are just three hours away, offering connections to everywhere in the world. El Al will be outperformed and underpriced by these new competitors, and the new owners will have a very big learning curve ahead of them.”
IN ANY case, Feldman estimated that in the best-case scenario, travel this summer could reach 50% of what it was two summers ago. The first people to jump on planes will be leisure travelers and people looking to visit their families back home, he said. “Many corporate accounts have already set as policy that they won’t begin flying until June or July.”
Those estimates were similar to the findings of a recent Bank of America survey that found that global business travel would decline by about 15%  following COVID. The same survey found that two-thirds of Europeans are optimistic that they will be able to take a leisure trip by the end of the summer.
In the post-COVID period, airlines will have to invest heavily in rebuilding confidence, the European executive noted. “Crews will have to be trained to maintain the new standards of cleanliness and social distancing that are the new norms. Already, all new aircraft are being equipped with HEPA air filters that can eliminate 99% of bacteria in the air. Airlines will need to invest to make sure their planes are as clean as an operating room.”
The same goes for hotels, although the market for short-term apartment rentals will likely gain even more momentum, as travelers seek more isolated travel experiences, he said.
Feldman expressed a bit of surprise at American Airlines’ recent announcement that it plans to begin offering direct flights from Tel Aviv to New York’s JFK Airport in May. “El Al still hasn’t restarted the routes it canceled to Chicago and San Francisco. We’ll have to wait and see if it happens.”
“Everything in the travel world has been a matter of ‘one step forward, three steps backward.’ For a while, China thought it was in the clear, but it imposed a new 21-day quarantine period last month. And Tokyo says it is going to hold the Olympics this summer, but we don’t know yet if spectators will be allowed,” Feldman said.
“The only thing that seems certain is that airlines will keep prices low for the remainder of the year to try to bring customers back.”