Israeli flag carrier, El Al, has recorded a $60 million net loss for 2019. This is higher than the airline’s net loss from 2018. However, last year, El Al did fly more passengers while increasing revenue slightly.
El Al’s 2019 results
2019 was an exciting year for El Al. The carrier withdrew older jets like the Boeing 747 (in a grand fashion) while taking 14 brand new Dreamliner aircraft and completing some interior refits on planes.
In terms of financials, the airline increased its revenues by 2% to $2.18 billion. Operating expenses were down about 1% to $1.83 billion. Despite this, El Al saw costs in interest on lease liabilities as well as loan interest expenses that went to financing Boeing 787-9 aircraft. Payroll expenses were up by USD35 million due to new wage agreements and pilots transitioning between fleets. Other costs of $17.4 million were in maintenance and the acquiring of spare parts for new 787s.
Passenger revenue was up 2.5% in 2019, or by $48.5 million. However, cargo revenues were down $13 million. El Al cited weakness in the global cargo market, serious competition, and the negative impact of exchange rates for cargo revenues.
El Al focused on retiring older aircraft. The Boeing 747s were gas guzzlers. The newer, more fuel-efficient 787s will reduce long-term costs. In addition, the airline becomes more competitive, thanks to the airline’s stylish onboard product.
The airline prepares for a further hit in 2020
The coronavirus pandemic is taking its toll on airlines around the world. El Al is taking steps to shore up its cash reserves. For one, more than 90% of the airline’s employees are on unpaid leave. Executives and board members have taken a 20% decrease in compensation. Investments have either been paused or canceled.
El Al also shook up its fleet. It canceled leases on two 737-800s, returned three wet-leased aircraft to lessors, and agreed to deferments on some leased aircraft. Additionally, El Al signed an MoU for the sale and leaseback of three 737-800s, adding some much-needed short-term cash. Some passenger aircraft are being used to support cargo operations. Meanwhile, the airline is flying some special repatriation flights.
Lastly, the airline is also working with the Ministry of Finance to obtain $400 million in funding. However, the most shocking statement from the airline’s 2019 results was this:
Given the uncertainty over the completion of said assistance, which is essential to allow the Company to address the consequences of the crisis at this stage, the Company estimates that there are significant doubts about its continued existence as a going concern.Advertisement:
What comes next?
In 2018, El Al posted a net loss of $52 million. That widened to $60 million last year. This year, El Al will likely see even worse numbers. Fleet renewal does come with high short-term costs. However, lower long-term fuel costs, lower maintenance costs, and a more competitive onboard product will help El Al achieve passenger growth while also maintaining efficiency.
The first real test of this strategy was supposed to be 2020. Although, now, it looks like El Al is fighting for survival like many other airlines. The airline is the flag carrier of Israel and provides the most connections out of Ben Gurion Airport in Tel Aviv. A collapse would be damaging to Israel and likely lead to a decline in air travel to and from the country.
What do you make of El Al’s 2019 results? Let us know in the comments!