Investors are expecting El Al's profits to soar again - the airline has never had it so good

El Al has seen its share price rise by 23% since the beginning of July, including a 4.95% rise on Wednesday, giving the company a NIS 2.24 billion market cap as of Thursday. The airline has been boosted by its near-monopoly status in flights to and from Ben Gurion airport as geopolitical tensions have caused many of its rivals to stop flying to Tel Aviv. The strengthening of the dollar against the shekel and the fall in the price of jet fuel have also benefited the carrier.

Rozenberg's successful investment 

Businessman Kenny Rozenberg, the company’s controlling shareholder, could not have expected better luck when he bought his stake in 2020 at the peak of the COVID crisis, which threatened to crush the airline.

In the wake of the dramatic improvement in the company’s results, strengthened by the war and a significant streamlining of operations, El Al’s share price has soared 115% since the third week of the war in October 2023.

The latest jump in the company’s share price follows the security tensions after last week’s assassination of senior Hezbollah and Hamas leaders and fears of reprisals by Iran and its allies.

This has led, among other things, to a rapid depreciation of the shekel against the US dollar, which benefits El Al, which prices its fares in dollars but pays its salaries in shekels.

At the same time, concerns about a global recession due to weak US job data have seen the price of oil fall 11% over the past month. El Al, which like all airlines is a huge consumer of oil, can now buy jet fuel at much lower prices.

The third and most important element in the equation that works in El Al’s favor is the increase in the price of tickets. Heightened geopolitical security concerns have caused many airlines to recently announce the cancellation and suspension of flights to and from Tel Aviv, forcing Israelis to purchase El Al tickets at high prices.

Although El Al stubbornly insists that it is not hiking fares, inevitably, when supply is reduced, and the Israeli airline once again controls the skies, prices rise. In the first months of the war, more than 80% of passengers traveling to and from Israel took El Al flights. Since then its share dropped to about 40% in June, although it rose again in recent weeks.

“Occupancy of El Al aircraft was full even before August and its supply is limited,” said a market source. “When demand is much greater than supply, it weighs on the market.” But passengers were not comforted by these explanations.

The same market source tried to soothe Israeli consumers. “I suggest not getting too upset that large companies like United Airlines and easyJet have canceled flights for a long period. At the start of the war, United canceled flights until the summer (of 2024) but resumed flying to Israel in April.”

Will the second quarter see record profit?

El Al reported its best-ever financial results in the first quarter of 2024 with a net profit of $80.5 million, compared with a net profit of $117 million in all of 2023 – a third of which was in the final quarter after the start of the war. In the coming weeks, El Al will publish its financial results for the second quarter of 2024. Investors will not be surprised if profits again break records, which El Al itself forecasts.