El Al, the moment of truth is closing in

The moment of truth is approaching the headquarters of El Al at Ben-Gurion international airport, at the speed of a 747.

 

When on Wednesday the Israeli airline announced that it lost $49.4 million in 2011, no-one in the industry was surprised.

 

The loss is very painful for an airline that in 2010 reported a profit of $57 million.

 

What happened? Why has the slope become so steep? The answers are clear but El Al seems unable to try and stop the dive it is in.

 

By every parameter, El Al is in a dive. Its market share was 33.9% in 2011, a decrease of 9%. Load factor was 80.3%, compared with 81.6% in 2010.

 

El Al tried to explain the difficulties it is facing by not being able to join one of the aviation alliances.

 

El Al also explained that it has taken measures to reduce its expenses. This is a fact, but it is far from what is really needed.

 

In order to survive, El Al has to lay off at least 400 employees. It also has to rearrange its route structure and put more emphasis on long hauls. These two crucial steps were not taken, according to the airline, because of external hurdles.

 

The fact that Ben-Gurion airport is not a hub also makes El Al’s life even more complicated.

 

In spite of El Al’s opposition to the planned common aviation area agreement with the European Union, it seems that the agreement will be signed.

 

El Al claims that the agreement will be “a disaster” because it will give a clear advantage to the European airlines.

 

An industry source said that the fear is that while the European airlines will be able to fly to Israel as much as they want and from any destination, El Al and the two other smaller Israeli airlines will be limited by slots in the major European airports.

 

This may be true and the Israeli government should get the necessary assurances, but that is not a reason not to sign the agreement that will also give the Israeli airlines some very big advantages.

 

The agreement may also put an end to a colossal absurdity. The Israeli anti-trust commissioner may finally understand that allowing greater cooperation between the three Israeli airlines will not hurt competition.

 

The commissioner may finally understand that the competition is with the dozens of foreign airlines that currently fly to Israel. There is no question that this number will grow after the agreement with Europe is signed.

 

So, urgent steps must be taken. Will they be taken? We shall wait and see. Any prediction will not be based on solid facts.

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