El Al 82% Drop in Profits Blamed on Gaza War

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David Maimon

El Al was hit, as expected, during the summer’s war in Gaza, which also hit virtually every local facet of Israel’s tourism industry, Globes reported.

Back in July, El Al announced that due to the war “many flight cancellations by Israeli and foreign travelers were recorded, in both outbound and incoming flights, in addition to the significant drop in bookings for the company’s flights to society, which the company presumes can be attributed to operation Protective Edge.”

Back then, El Al was anticipating a drop of $60 million in revenues for Q3.

You may want to add to that the U.S. State Dept. travel warning which was posted on July 21, when Operation Protective Edge was at its height. And while that alert was legitimate, few understood the reason for a second travel warning, issued on September 10, well after the hostilities had ended. As JBN mentioned at the time, the language of the new warning might give the impression that the conflict is still raging, with references to finding bomb shelters, evacuating civilians during emergencies, and buying gas masks.

This morning, El Al reported that third quarter revenues totaled approximately $601.2 million, compared to $643.3 million last year, a drop of 6.5%. Passenger revenues decreased by 7.3%, while revenues from transport of freight increased by 4.5%.

The company’s operating expenses increased by 2% to $ 493 million, compared with 483.6 million in the same period last year. This increase was mainly due to an increase in jet fuel costs and an increase in fees and route charges and were offset by a decrease in wages and in spending on security.

Salary expenses decreased in the third quarter primarily due to the shekel’s exchange rate depreciation against the dollar, impacting the Company’s liabilities for employee benefits. The number of company employees, permanent and temporary, averaged 6, 216 employees, compared with 6, 109 last year.

El Al’s revenues in the first nine months of the year totaled roughly $1.59 billion compared to $1.6 billion last year, a decline of about 1%, mainly due to a decrease in yield due to increased competition, offset by an increase in passengers. The first nine months of 2014 showed a loss of approximately $13.2 million, compared with a profit of about $29.1 million last year.

El AL Chief Executive David Maimon, said: “The third quarter results reflect the impact of ‘Protective Edge, ‘ which caused significant damage to revenues, following after which El Al sought government aid. This is the first time since the Second Lebanon War in 2006 that El Al shows such a significant decline in profits in the third quarter, which is traditionally considered our strongest quarter. In addition, the quarter was characterized by price erosion that lead to a reduction in passenger revenues.”

On another issue, which could also impact company income, Maimon addressed El Al’s crashing labor relations, noting that “a few days ago, the pilots launched a wildcat strike due to the Civil Aviation Authority directive that pilots may not continue to fly after age 65. The pilots’ sanctions hit hundreds of passengers, especially at this sensitive time. I call on the leaders of the labor committee to negotiate with management without hurting our passengers.”

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