EL AL losses and the built-in problems

It is very convenient for EL AL, the Israeli airline, to blame high fuel prices for its losses in the second quarter, but this is only one reason – the others are “built in”. The strange thing is that no real effort is being made to change the situation.

El AL reported a loss of $19.7 million, compared with a net profit of $14.8 million in the same quarter last year.

Revenue was $530.49 million in the second quarter, up by 5.6% from the same quarter of 2010. Operating costs were $470.15 million (88.6% of revenue), up by 17% from $400.94 million in the corresponding quarter of 2010.

El Al said there was a sharp rise in the average price of jet fuel, 47%, compared with the corresponding quarter of 2010.

It also reported 12% higher passenger traffic on routes to western Europe than in the corresponding quarter of 2010, a 9% rise in passenger traffic to central and eastern Europe and a 37% rise to the CIS. Transatlantic passenger traffic rose by 1%.

The fuel prices did affect the results, as did the US dollar exchange rate, but that is only part of the picture.

El AL has not yet succeeded in joining one of the aviation alliances, and is still operating five and a half days because of a “historic” agreement with religious parties that want the airline grounded on the Jewish Sabbath.

EL AL is also slow to react when a route is losing money. The airline only two weeks ago announced that it is to cease direct flights to Sao Paulo in Brazil in November. This came after the route did not reach the profitability expectations.

This route has lost money since the first flight, but reaction time was slow – very slow in an industry that works on thin profit margins.

One Response to EL AL losses and the built-in problems

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