Joel Feldschuh's experience as a fighter pilot in the Israeli air force and head of its intelligence should prove useful in his new job as the president of El Al, the Israeli national airline.

He is aware, however, that these skills alone will not be enough to improve the performance of a crippled airline which showed a record loss of $100 million in 1996.

In order to succeed, Feldschuh will need to combine his military experience with the business acumen he gained as president of a computer software company and as head of the local Volkswagen distributor.

El Al is hampered by a politically imposed handicap which only allows it to fly five and a half days a week. In 1996, the carrier suffered a triple blow: fuel prices rose globally, there was a decline in traffic to Israel because of a series of terrorist acts in major cities, and the cost of security escalated.

"The open-skies policy of the Israeli Government has worsened our situation. The greater freedom the European airlines got as a result of the new policy enables them to carry more traffic from Israel to North America and back. This forced us to lower our prices to the USA. With the burdens that we carry as a national, Government-owned airline, we expect the Government will protect us from the growing erosion in our yield," says Feldschuh.

The ban on El Al operating on the Jewish Sabbath and other religious holidays, and its contribution to the $80 million annual security budget, are heavy financial penalties for the airline to shoulder.

Feldschuh comes to El Al believing that the Government is determined to privatise the airline. "Privatisation will allow us to fly seven days a week," he says. Nevertheless, his predecessor resigned in protest at the delays as successive governments pledged support but repeatedly delayed actually undertaking the move.

Even though most observers consider the Government's privatisation commitment to be vague, El Al is trying to restructure its way out of its financial problems, and provide scope to move ahead once the scheme is agreed.

At the same time employees are considering launching their own bid to take control of the airline in an effort to end the uncertainties caused by lack of progress on privatisation. A workers' committee is now studying plans to join forces with outside investors to raise the $100 million needed to gain control.

Consultants have been helping with long-term planning of the airline's marketing strategy, and cost cutting is going ahead. In recent years, the airline has also expanded its route network, mainly in the Far East and in Eastern Europe.

The El Al Scandinavian operation is being handled as a separate business unit, an example which will soon be followed in Switzerland and Italy. If this proves successful, El Al may turn its cargo operations and maintenance operations into separate units .

This will conform with Feldschuh's plan to increase the non-flying side of El Al's operations. The Israeli airline has a subsidiary who is in charge of hotel management, catering and other related operations but, in recent years, its development has been slow. "I think we should create alternative income sources, spreading the risk so we aren't relying mainly on flying passengers," he says.

The quality of service offered by the airline is also being reviewed. Israelis are not service minded, and it takes a lot of effort to create the right attitude to service in an airline which is expanding its business class. Improvements have been achieved in recent years, but Feldschuh is determined to see more. "Our passengers are very demanding, but we can satisfy their demands," he says. He insists on seeing every written complaint sent in by a passenger.

Co-operation with other airlines is also a major item on the streamlining agenda but, for the time-being at least, the road to such partnerships is not an easy route to negotiate.

El Al and American Airlines have reached a codeshare agreement, but it cannot be implemented because of the Israeli airline's opposition to the third-party code share which Northwest and KLM are planning on the North Atlantic route via Amsterdam to Israel.

El Al claims that this type of codesharing is not included in its air agreement with the USA, and that allowing it will open the gate for other alliances such as that of United Airlines and Lufthansa. The US Department of Transportation has reacted to El Al's opposition by freezing its codeshare agreement with American.

"The third-party codeshare some airlines want to implement on the route to Israel is unprecedented. We will fight it with all our force," Feldschuh says.

That is only one of the many hurdles El Al faces as it fights its way toward profitability. Nevertheless, Feldschuh remains optimistic. "With luck, we may reach the break-even point this year," he says. He concedes, however:"This, of course, is a very optimistic forecast."

Feldschuh is in no doubt that it will take more than optimism to change the course of an airline which has just suffered the worst loss in its history.

Source: Flight International