Israeli flag carrier EL AL just reported a disappointing quarterly loss and faces intense competition in the TLV market.
EL AL blamed rising jet fuel prices and higher employee salaries for its $29.7MN fourth quarter loss. While revenue grew by 11%, expenses rose by 17%. A year ago, that fourth quarter loss was only $2MN. For all of 2017, EL-AL reported a meager $5.7MN profit, down from $80.6MN in 2016.
Chief Executive Gonen Usishkin told Reuters:
During 2017 the company faced increasing competition in the Israeli aviation market as a result of a significant increase in the number of seats of foreign airlines, especially low-cost carriers.
He’s right. We’ve seen increased service from the following carriers–
- Turkish Airlines
Aeroflot and Turkish are very much full-service carriers, but routinely offer some of the most attractive pricing.
This new competition has resulted in EL AL’s market share dropping from 32.6% to 28.5% in one year while passenger traffic at Tel Aviv jumped 16%.
EL AL is looking across oceans for more profitable routes. I don’t blame EL AL for looking beyond Europe. European low-cost-carriers place so much downward pressure on pricing it simply may not be worthwhile to compete.
With 16 787s on the way from Boeing, look for new international route announcements later this year. Already the carrier has stated it will fly to San Francisco. United’s SFO-TLV flight is one of its most profitable.
It’s not only about profits for a flag carrier. Sometimes losing money is acceptable because of the other benefits a national airline provides. Still, the growing competition cannot be comforting. EL AL has canned its low-cost “UP” subsidiary, rolling it back into EL AL. Can the carrier cater to both budget and premium customers on the same flight? Only time will tell.