El Al offers poor defence of first-quarter results

When a company makes silly mistakes it sometimes uses silly excuses for its losses. That’s exactly what Israeli airline El Al did on Monday.

The poor first-quarter 2013 results were followed by excuses. Blaming the results on the effects of the Pillar of Defense military operation in Gaza last November is a bad joke.

With a slow-growing load factor that reached 81.7%, compared with 81.2 % last year, the excuse is weird.

El Al’s net loss for Q1 2013 reached $32.5 million, compared with $23.2 million in the first quarter of 2012.

Revenue totalled $431 million compared with $429 million for the corresponding quarter of 2012. Revenue from passenger traffic rose by 2%, but cargo revenue fell by 11.5%.

El Al’s market share fell from 36.6% in the first quarter of 2012 to 34.7% in the first quarter of 2013. Its operating loss was $36.3 million for the first quarter compared with $23.8 million for the corresponding quarter.

Cash flow from operations was $80.5 million for the first quarter, up from $65 million.

El Al chief executive Elyezer Shkedy said on May 27 that the Q1 2013 results were still affected by operation Pillar of Defense and by competition in the aviation industry. 

“The company is constantly adapting to the situation, reducing activity, and streamlining. In the first quarter of 2013, the company reduced its activity compared with the corresponding quarter of last year. Operations of the airline’s planes achieved an occupancy rate of 81.7%.”

Aviation sources said that EL AL is continuing to avoid some necessary steps, such as laying off nearly 1,000 of its workforce. 

And that is only one of its mistakes. 

The airline also keeps flying only five-and-a half days a week, because of a coalition agreement from years ago when religious parties were in power. It keeps flying a short domestic route to Eilat, the resort on the Red Sea, with equipment that makes this operation unprofitable. These are but two of the mistakes. 

It is strange that the shareholders do not understand what almost every employee will tell you privately.

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