ALEXANDER CAMPBELL / LONDON
Chief executive David Hermesh sees the Israeli airline offering security expertise as it prepares to expand market share
El Al, Israel's state-owned flag carrier, has faced a terrorist threat for most of its existence. As airlines in less wary parts of the world, especially the USA, start to tighten security, El Al chief executive David Hermesh hopes that they will be ready to learn from the Israelis - ideally, from a planned El Al/Boeing security joint venture set to proceed this month.
"El Al has experience with security in all areas," says Hermesh, noting that the airline has not felt it necessary to make any changes to its security precautions since 11 September.
The joint venture with Boeing would offer security consultancy to airlines and airport operators, and might also act as an operations subcontractor. "We are in final product discussions now," Hermesh says, with a decision on whether - and how - to proceed due by the end of this month.
Air travel around the world was hit badly by the attacks last September, but El Al was already a year into a similar crisis in the shape of renewed violence in Jerusalem and the West Bank. As a result, Hermesh says, "we started to adapt a year ago, cutting 20% of capacity" and making 10% of its workforce redundant. More cuts are possible.
Following 11 September, he believes, El Al's reputation for high-security could be an important selling point, and cutting back a year ago meant that the airline was better prepared than its rivals for the fall off in traffic in late 2001. After an unprecedented traffic slump earlier in the year, the figures actually slightly improved in October compared with 2000. Pre-September estimates of losses for the year at around $100 million may also be moderated.
The Palestinian intifada has also reduced El Al's competition - its rivals on international routes to Tel Aviv have cut 30% of their services, citing crew and aircraft safety as the reasons. El Al, by contrast, has cut none of its transatlantic services, and does not plan to do so - Hermesh believes that high security will allow El Al to expand its market share as passengers start to rate security highly.
Secure carrier
Meanwhile, the Afghan war has had unforeseen benefits for El Al's cargo division. Commercial customers are now wary of possible dangers and delays with air freight, but, again, El Al's reputation as a secure carrier works to its advantage.
In times of uncertainty, too, companies tend to stock up on raw materials and components, creating a short but important cargo boom. In addition, waging modern war requires vast amounts of air transport capacity, which has greatly reduced the tonnage available to haul commercial cargoes.
To take advantage of the shortfall, El Al has doubled its cargo fleet to four Boeing 747-200s by switching a pair of 747-200C passenger/freight convertibles to solely cargo work, although the short-term bonanza does not justify buying more freighters.
Longer-term, the increased terrorist threat could lead to permanent changes in behaviour - especially in Europe, where high-speed rail links are becoming increasingly common. Hermesh believes that passengers could shift permanently to land transport.
The fall in business travel, however, should be only temporary. "It is in the nature of humans to get together, "he believes, and more modern fleets should boost demand as airlines buy to replace retired aircraft at the end of the current recession.
Hermesh agrees with Crossair's chief executive, André Dosé, that the future of the industry is in increased point-to-point traffic, rather than more traffic between a few hub airports. He says that screening passengers every time they board another aircraft will make hub travel far slower and costlier, tilting the economic balance towards point-to-point traffic - an argument used by Boeing to support the case for its Sonic Cruiser high-speed aircraft and to undermine Airbus' A380 ultra-large aircraft. El Al already operates "mainly as a point-to point, not a hub-based airline", he says.
Time to privatise
Unlike many of its European counterparts, El Al is still fully state-owned. Privatisation has been discussed for years, but with little progress. However, Hermesh is eager to get on with it. "This is the right time," he says, "because we are more attractive now than we were a few months ago, and we will be still more attractive in a few months' time."
Although the sluggish stock market and hostile economic climate militate against starting the 12-18 month process now, Hermesh insists: "There is no reason to wait two or three years. Every year we will be able to find some reasons not to do it."
Source: Flight International
