Praising El Al in Israel's current situation - analysis

It’s been five months since the October 7 massacre, 150 days with over 100 hostages still being kept like animals in Gaza. Israeli soldiers were killed almost daily, and the fog of war remains as thick as ever.

Friends, role makers, consumers, lend me your ears. I come not to bury El Al, but to praise it. El Al just announced that its profit rose 370% in the last quarter of 2023. This translates into almost $40 million.

Keep in mind that it was only in mid-October that El Al warned of a hit in its fourth-quarter results, due to the war. In November, El Al doubled down on that, saying the first quarter of 2024 would also be adversely affected.

I’m not quite sure where El Al’s projections were coming from, as, with a paucity of airlines flying to Israel, El Al knew it would grab a sizable market share.

Sizable is an understatement; El Al managed to vault from its normal 21% market share to a monopolistic 80%.

There was an Etihad here, an Israir there, a drop from Fly Dubai, a dab of Arkia, but 80% of all those traversing Ben-Gurion Airport were El Al customers.

So it raised its prices, and raised them more, and when consumers starting noticing the huge increase, it raised them even more.

For what could most clients who were flying to North America do? These weren’t the days of the pandemic, when few airlines were in operation and most countries actively dissuaded tourism. This is a war, affecting exclusively Israel. Foreign airlines scattered away as though the skies were raining missiles over the airport.

Hints of a recession in North America never materialized; the worldwide airline industry recovered from strongly eclipsing pre-COVID figures.

In Israel, business travel also rebounded to prewar figures. Congresses and conferences were being held, and the Israeli companies damn well were going to be present. The Consumer Electronics Show in Las Vegas in early January saw record Israeli participation.

Don’t imagine that the largest printing equipment exhibition in the world, Drupa, in Dusseldorf, won’t have thousands of Israelis attending this spring. Even in the first two months of this year, El Al managed to keep nearly three out of every four passengers on an El Al plane.

Initially, El Al rebuffed criticism of its obscenely high air fares, bemoaning the fact that so few tourists were flying to Israel. Sure, it announced, it had the solidarity delegations and a spattering of tourists flying to Israel to volunteer in the fields or visit families living in Israel. But that was only a drop in the bucket compared to the post-COVID deluge of tourist groups flying to Israel.

Politics, too, raised its head. Once El Al saw that the future booking numbers from South Africa to Israel were bleak, and coupled with the virulent antisemitic remarks emanating from the South African government, El Al decided to cancel the route.

March 27 will see that route suspended, meaning that even if those South African Jews want to come to Israel this Passover, El Al will not be of service. Nonetheless, El Al’s concerns that its air traffic would suffer was poppycock as well. The number of passengers that El Al flew in 2023 was 32% higher than the previous year.

Do understand that the decline in the number of airlines flying to Israel severely narrowed the possibilities for those flying abroad. Low-cost carriers have been absent from the Israeli skies for over four months, allowing all the Israeli airlines to pick up the slack. It really is a classic example of supply and demand. Very high prices exist because they can, because consumers who need to fly will pay the price.

El Al has been playing a strong role in the war efforts, flying out survivors and their families to a multitude of destinations. It recently offered over 17,000 tickets to reserve soldiers at a minimum cost. These legitimate marketing moves are to be praised, and the fact that the share price has risen so dramatically and the paper profits of its primary owner, Kenny Rozenberg, ballooned should not be criticized.

THIS PERFECT storm is coming to an end. That El Al managed to make so much profit will be hard, if not impossible, to duplicate.

Many of the European airlines have returned to Ben-Gurion Airport. First to return were most of the airlines of the Lufthansa Group: Austrian, Swiss, and Lufthansa. Their crews agreed to a two-hour respite in Ben-Gurion Airport before scurrying back to their home airports. This month will see more European airlines, ITA Airways (formerly Alitalia), Air France, and Brussels Airlines. Most have only afternoon departures, meaning onward connections to Europe, the Far East or North America are nonexistent.

“Road warriors” is the term to describe those Israeli residents who, while living in Israel, work abroad. There are some from France, a few from the UK, but the vast majority of road warriors are North Americans living in Israel but working in the US. They are doctors and lawyers, health professionals and businesspeople, but their primary source of income emanates from their jobs in North America.

You can see them after Shabbat on Saturday night or Sunday at Ben-Gurion Airport. Often flying twice a month, these frequent fliers are coveted by the airlines. Many were very loyal to El Al, but there was a strong group that pledged its loyalty to United and Delta.

As nature abhors a vacuum, these fliers moved en masse to El Al. They quickly climbed to the top of the frequent-flier hierarchy, but before every booking they asked: 

“When are United and Delta returning?” It wasn’t because they desired to move back to those airlines; it was because the prices they were forced to pay on El Al were an easy 50% more than what they had paid in the past.

Fall moved into winter, winter is turning into spring, and still no relief in sight. So El Al continues to get their business. When the bubble will end remains a mystery.

Change in flying between Tel Aviv and North America

WHERE THE next change will take place is in flying between Tel Aviv and North America. Thousands of North American Jews have expressed a strong interest in coming to Israel despite the high prices. For months, El Al had a near monopoly route to North America, but that ceiling has begun to shatter.

United Airlines has now returned flying to Tel Aviv from Newark. Yes, it’s only a daytime flight; and, yes, its nonstop flights from Chicago, San Francisco, and Washington to Tel Aviv won’t make an appearance until late fall. But due to this competition on the coveted North American route, El Al will see its market share and its share price drop. United has not yet begun to aggressively market its fares. Its fares are still in the stratosphere, allowing El Al to maintain a large percentage of those fliers who might have switched to United. This will change, provided the fight with Hezbollah does not result in an outright war.

Delta Airlines is planning a return to its JFK-to-Tel Aviv flight in May, postponing Boston and Atlanta flights until 2025.Do not expect much relief in the ticket prices. The paucity of airline seats coupled with a shortage of airline seats will keep airfares high throughout the spring and summer.

El Al will offer dozens of flights every week to JFK, Newark, Boston, Fort Lauderdale, Miami, and Los Angeles. United will have one daily flight with perhaps a second daily flight to Newark in the late summer. Delta will have flights to JFK. This drop in the bucket will ensure that airfares stay high.

But as competition slowly returns to the industry, the fares will come down. When more European airlines offer same-day connections to North America, as both Austrian and Lot Air have done, discerning customers will opt to fly with a stop rather than pay hundreds, if not thousands, more.

One of the leading foreign airlines, Turkish Air, which five months ago was flying six daily flights to Istanbul, will not be returning so quickly. The misogynist leader of Turkey, Recep Tayyip Erdogan, seems to foam at the mouth as he spews his antisemitic venom. Cyprus and Greece will pick up the business of leisure passengers yearning for a quick getaway.

That Fly Dubai and Etihad never ceased flying to Tel Aviv and offered the best way to fly to the Far East and Australia shows how the political map has changed. Ethiopian Airlines’ return has cut into the UAE airlines’ near exclusivity, and with Air India’s return, the savvy Israeli consumer can find reasonable fares in and out of Tel Aviv. El Al simply cannot compete to these parts of the world, except to Japan, where its flight to Tokyo has surpassed expectations.

While being one of the leaders of low-cost carriers, Ryan Air continues to oscillate between returning and staying away. Other short-haul carriers, such as Easy Jet and Wizz Air, along with Cyprus Air, are expected to return in April. Their flights tend to attract leisure clients.

While the demand for travel next month, as Passover approaches, is relatively high, it pales in comparison to last year. War has changed how consumers are purchasing tickets. Uncertainty and fears about the war’s expansion have led many people to delay their purchasing. That only recently has the desire to purchase tickets for Passover surfaced is proof of this.

Conversely, there are airlines, like Cathay Pacific or American Airlines, that have turned tail and announced they won’t be flying until the end of October. Whatever feeble excuses they proffer, it would be surprising if the Israeli consumer doesn’t forgive their cowardice and in a short time fly with these turncoats when they return to Israel.By and large, El Al has been stupendous throughout the war, its in-flight experience finally achieving the levels of customer satisfaction that were lacking. Yes, El Al changes flight times constantly, making reissuing tickets a challenge. So, while I still have a myriad of contentious issues with El Al, my warning of caveat emptor no longer applies.

Mark Feldman is the CEO of Ziontours, Jerusalem, and a director at Diesenhaus. With questions and comments, email him at mark.feldman@ziontours.co.il