Israel special - Flag carrier El Al thrives despite high fuel costs and competition

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Israel's recently-privatised flag-carrier is thriving, despite fuel costs and an open skies policy that has increased competition

Today we have shareholders who do not just expect us to be the airline of the Jewish nation," says El Al chief executive Haim Romano. "They expect us to be profitable." Three and a half years after privatisation and with less indulgent owners than before, the flag carrier has survived domestic and overseas competitors at Tel Aviv Ben Gurion's new terminal under the government's open skies policy, rising fuel prices and the blow to the region's tourism of the 2006 Lebanon conflict. The airline has been working hard to develop markets in Asia and eastern Europe, as well as cutting costs and improving load factors. Profits have risen sharply during 2007.

Quality service

Despite the emphasis on lean operations, Romano says El Al's Israeli identity and quality service will remain its biggest selling points - its slogan is "Home away from home". Some 60% of its passengers are Israelis, and El Al still refuses to operate flights from Tel Aviv on the Jewish sabbath.

El Al has been boosted by a growth in traffic to and from Israel and passenger numbers on international flights are expected to break the 10 million mark this year for the first time. El Al's Israeli rivals Arkia and Israir are adding frequencies and, among the overseas airlines increasing their activities, Delta will add New York to its current Atlanta daily service in March and BMI will begin flights from London the same month.

The booming market is keeping Airbus and Boeing on their toes. According to Drew Magill, Boeing commercial aircraft's director of marketing, Israeli airlines will purchase 60 to 80 aircraft in the next 20 years, half of them widebodies - which represent 30% of the current Israeli fleet.

In December 2006, Israir put an end to Boeing's monopoly when it ordered two Airbus A320s for delivery in 2010. The carrier is also evaluating the A330. But El Al operates a 36-strong all-Boeing fleet and plans to rationalise its long-haul aircraft around the 777 or 787. Romano does not rule out the A350 - "If Airbus come to us with the right proposition" - but a breakthrough looks a distant prospect.