Arie Egozi/TEL AVIV
THE THREE ONE-STOREY prefabricated office buildings at Dov Airport in Tel Aviv reflect the spartan way in which Israeli private airline Arkia is managed.
Arkia was founded in 1950 by Israeli national airline El Al and Israel's labour federation, to provide an air link between central Israel and Red Sea resort town Eilat. The domestic network grew to cover the country. Today, holding company Knafaim ("wings") has a 75% stake in Arkia, with the rest held by employees. In 1993, Koor, one of Israel's largest holding companies, bought 17.8% of Knafaim, to increase its involvement in aviation and tourism.
From a domestic carrier with one main route, Arkia has become an international charter operator and the owner of a fleet of passenger and cargo aircraft leased to foreign operators. This fast expansion bears the fingerprints of Arkia president Israel Borovich, who, with other family members, holds a major stake in the airline.
A fleet of five leased Boeing 757-200s and two leased Boeing 737-200s operates charter flights to all major European destinations, generating 29% of the airline's 1995 income. Domestic flights, operated mainly with a fleet of ten de Havilland Dash 7 turboprops, contributed 45% of the 1995 $130 million turnover, producing a $7 million net profit.
INTERNATIONAL EXPANSION
"The domestic market is still our main activity, but international flights expand all the time to respond to market demand," says Borovich, who led the move to create a joint El Al-Arkia operation, enabling the airlines to operate charter flights with the necessary flexibility.
The well-established co-existence between the national, state-owned airline and the private carrier is a model of efficient fleet utilisation. From mid-March, Arkia will operate El Al's scheduled flights to Cyprus. The Dash 7 is the ideal aircraft for this 1h flight, as it will be for the planned route to Jordan. "We have the right equipment for such regional flights and I'm sure that more such short routes will be operated by us in the future," says Borovich. El Al has agreed that all regional flights up to 90min will be operated by his airline.
The Middle East peace process has opened new options, with the Gulf states high on the list. Tel Aviv-Gulf states flights are not included in the 90min limit, but Borovich believes that Arkia will be allowed to operate at least some, provided that the peace process progresses.
Charter and regional flights are seen as the right substitute for the domestic operation. Until now, Arkia had the monopoly on the scheduled Tel Aviv-Eilat flights. Soon the Israeli transport ministry will license another airline to operate scheduled flights on this route. This is the main reason why Borovich wants to decrease the carrier's reliance on domestic flights, saying that "...domestic flights are not profitable." This forecast is driving Arkia's effort to increase its international operations and other activities, mainly aircraft leasing.
LEASING ACTIVITY
Arkia Leasing, a wholly owned subsidiary registered in the Isle of Man, has been active in recent years. The subsidiary owns three Boeing 747-100Fs, one 747-200F, seven 737-200s and one Boeing 727-200. All these aircraft are leased to other airlines, contributing 18% of Arkia's turnover in 1995.
In recent years, Arkia has dramatically increased its tourist operations. "I like to present Arkia as a tourist organisation that has an airline," says Borovich.
The trend to decrease domestic operations and expand regional and international flights has brought Arkia to look for more aircraft. The airline has tested potential replacements for its Dash 7s. The leading contender is the Dash 8-400, but a decision will be delayed until the second domestic carrier is selected and until the regional flights take shape.
In 1995, Arkia carried 875,000 passengers on its domestic routes and 235,000 on its international charter flights. This year, both numbers will grow, but the international flights will account for a greater portion of the Israeli private airline's activity.
Source: Flight International
