Andrew Doyle/TEL AVIV
In an era when airline bosses preach the merits of focusing on "core activities", Arkia Israeli Airlines has learned to thrive through diversification.
As Israel's largest domestic carrier, Arkia built its international charter unit into a major leisure travel business, selling everything from hotel rooms to car rentals. It runs a leasing company with a portfolio of 24 airliners and is about to launch an airline operation in Nigeria.
"Most of our net profit comes from non-aviation business," says Arkia president and chief executive, Professor Israel Borovich, who describes the company as a "travel factory".
In 1997, for example, the privately owned company made a net profit of $9.2 million on a turnover of around $200 million, helped by the sale of 47,000 hotel room reservations.
Turnover is accounted for in roughly equal shares by three main business activities - international travel and tourism, regional and domestic aviation and aircraft leasing.
According to Borovich, around 17% of visitors to Israel arrive on charter flights. He would like to see this figure increase to more than one-third. Arkia's share of this market - in which it competes with 44 foreign charter carriers - stands at around 30%. "In charter I'd like to have a market share of at least half," he says.
For charter services, Arkia operates a pair of Boeing 757-200s on dry lease from El Al and uses an additional six examples of the type each Saturday, when the state-owned Israeli flag carrier is subject to a Sabbath flight ban. It serves destinations throughout Europe.
The airline is about to acquire its own fleet of 757s, however, starting with a used -200 that will join the fleet at the end of March. In addition, Arkia is the third airline customer for the stretched 757-300 and is scheduled to take delivery of two of the 265-seat aircraft in January and February 2000.
DOMESTIC DUTIES
On the domestic side, the first of three new 72-seat Aerospatiale/Alenia ATR 72-500 turboprops was added to the fleet on 5 January, with the second and third to be handed over in February and March, respectively. Options are held on four more of the type.
The Franco-Italian aircraft will initially replace three of the airline's 12 de Havilland Dash 7s, with two of the 50-seaters being transferred to Nigerian start-up Empire Aviation, which is being co-founded by Arkia.
The Tel Aviv-based airline's selection of the ATR 72 was perhaps surprising, given its large fleet of Dash 7s, but Borovich says that Bombardier's 70-seat Dash 8-400 - which is yet to enter service - lost out because it was not available soon enough.
"We knew we needed more seats, but we couldn't wait any more for the Dash 8-400 because we had too many flights and [Dov Hoz] airport couldn't handle it," says Borovich. "The Dash 8-300 wouldn't give us any advantage. It's the same size as the Dash 7 and operates at the same speed."
The turboprop fleet serves all of Arkia's domestic destinations, principally from Tel Aviv's city centre Dov Hoz Airport. Two Boeing 737-200s are operated between Ben Gurion, the city's international airport, and the holiday destination of Eilat in the south of the country. Arkia carries around 1.25 million passengers a year on its domestic and regional flights, most of which are scheduled.
Empire Aviation, to be based at Port Harcourt in Nigeria, is to begin operations at the end of this month. The carrier is a $4 million joint venture between Arkia, Israeli conglomerate Koor and a group of Nigerian investors, and will start by serving four domestic points in Africa's most populous nation, although it is looking at international jet operations in the longer term. The fleet will initially comprise a pair of Dash 7s transferred from Arkia, with a third to arrive next year.
Arkia executive vice-president for operations and maintenance Shlomo Hanael says the second stage of the development plan envisages the introduction of up to four 737-200s, followed by long-range widebodies in the final stage.
"By the end of 2000 - two years after starting operations - we believe we'll be ready to start with jets," says Hanael. "The long haul aircraft would follow about a year later," he adds.
Closer to home, Arkia is calling on the Israeli Government to lift flag carrier El Al's monopoly on international scheduled routes from the country. "We are waiting patiently for the government to give out routes to airlines other than El Al," says Hanael. "I hope it will happen - every day they say tomorrow." Referring to the government's decision to open the domestic market to competition, he adds: "Until now, the open skies came at our expense."
Source: Flight International
