Israeli flag-carrier El Al expects a 5-10% reduction in capacity over the fourth quarter, as a result of the Gaza conflict, and a fall in load factor, but it has yet to estimate the impact on the first quarter of next year.
El Al says it experienced initial high demand for flights after the conflict began, in early October, after foreign operators cancelled services, but subsequently recorded a decline in volume.
It cautions that slower sales and a “lenient” commercial policy for passengers – granting flexibility to postpone or change flights – is likely to lead to a deterioration in working capital.
The airline has been negotiating with suppliers to postpone or spread payments in order to improve cashflow, reaching settlements covering around $65 million.
El Al states, in its third-quarter financial disclosure, that it has been operating in an “emergency” mode in order to ensure air connections to and from Israel, adding that it does not expect the return of “most” foreign carriers until the end of this year.
Wet-lease of four aircraft has ended after the carrier received notice from two foreign companies that they were ceasing Israeli operations after the conflict began.
El Al has increased the scope of its cargo operations – both in passenger aircraft and dedicated freighter services – to supply the security forces.
“In response to the increased demand for combat equipment and essential equipment for Israel…the company worked to adapt a [Boeing 777] passenger aircraft to a cargo aircraft configuration,” it adds.
But it stresses that, while the conflict is affecting its business in the near term, there is “no substantial change” in El Al’s long-term strategy. It says it expects to meet its business targets in general, and those for 2023 in particular.
No Israeli government assistance for El Al, or the broader airline industry, has yet been forthcoming. The carrier says it is “working” with authorities on this issue.
El Al has taken steps to freeze non-essential expenditure, postponing investments in such areas as information systems.
The airline says “hundreds” of employees have been drafted and it has opted to stop most training for new employees with only certain exceptions.
Over the first nine months of the year – to 30 September, prior to the conflict – the airline generated a pre-tax profit of $85.2 million and a net profit of $77 million, on revenues of $1.82 billion.
El Al achieved a pre-tax and net profit of $52 million for the third quarter after generating revenues of $696 million.
