EL AL Israel Airlines Ltd. Concluded the Third Quarter With Growth in Its Business Operations, an Increase in Market Share, a Decrease in Fuel Costs and a Profit of Approximately USD 27 Million

"Notwithstanding the competition at Ben Gurion Airport, the Company succeeded to increase and improve its market share by 2%, with the number of passengers increasing by 6.5%. "Notwithstanding the competition at Ben Gurion Airport, the Company succeeded to increase and improve its market share by 2%, with the number of passengers increasing by 6.5%. "The Company's Acquisition Program progresses as planned. Thus far, the Company has received 12 new 787-9 aircraft, and by the end of the first...

"Notwithstanding the competition at Ben Gurion Airport, the Company succeeded to increase and improve its market share by 2%, with the number of passengers increasing by 6.5%.

"The Company's Acquisition Program progresses as planned. Thus far, the Company has received 12 new 787-9 aircraft, and by the end of the first quarter of 2020, 4 additional 787-8 aircraft are expected to arrive, thereby the Program will be completed.

"Alongside this, at the beginning of the year, all the 767-300 aircraft were removed from service and thereafter all the 747-400 aircraft were also removed from service, as the last one terminated its operation at the beginning of this month with a special and exciting farewell flight, after nearly 50 years of service in the Company's aircraft fleet.

"We completed the major part of the Aircraft Interior Improvement to 737-800NG narrow-body aircraft fleet.

"We entered into an agreement for the lease of 3 additional 737-800NG aircraft for a period of six years, of which the first aircraft is expected to be received in the next month, and the two others are expected to be received in April 2020.

"Out aircraft fleet has become younger and, for the first time, the aircraft average age falls below 10 years. Our product improves and we witness constant increase in our customers' satisfaction.

"As part of our growth strategy, we enhance existing activities and continue to expand our network of routes by launching routes to new destinations. Thus far in 2019, the Company has launched the routes to Niece, San Francisco, Manchester, and Las Vegas, and in 2020 the Company is expected to launch the routes to Chicago, Tokyo, Dublin and Dusseldorf.

"In July 2019, we launched the new booking engine for the Matmid Frequent Flyer Club members and improved the value offer to the club members.

"In September 2019, the Company entered into a triangle agreement with CAL, Diners and a new strategic partner, MasterCard, in connection with the branded credit card, Fly Card. The new card to be issued is a combined Diners and MasterCard credit card that has a global coverage and offers expanded options to redeem points in the aviation and non-aviation world. The Fly Card credit card and the Matmid Frequent Flyer Club constitute one of the most important growth engines of the Company.

"I would like to thank our customers for their trust in EL AL. I am convinced that EL AL will continue to provide its customers with quality service, maximum comfort, technological innovation and advanced airplanes. We are doing the utmost to allow the customer to choose EL AL over and over again.

"I wish to express special appreciation to EL AL people in Israel and worldwide, who work with determination and dedication and make an extra effort for the Company's success."

Dganit Palti, EL AL's CFO:

"The Company recorded a decrease in fuel expenses for the reported quarter, as a result of the decrease in jet fuel market prices and the amount of fuel consumed by the Company's aircraft, notwithstanding the 8% growth in operations, mainly due to the operation of the 787-9 aircraft, which are more efficient in fuel consumption.

"The initial implementation of the accounting standard IFRS 16 adversely affected the Company's results for the quarter by approximately USD 4.5 million, and for the first nine months of the year – by approximately USD 14.5 million.

"The company has signed an agreement with a JOLCO structure to finance the first 787-8 aircraft, expected to arrive this weekend. The USD 125 million financing includes a USD 106 million loan from a foreign bank for a 12-year period and an additional USD 19 million in Japanese Yen, to be provided by a Japanese company. The balance of the debt will be repaid after ten years at a pre-agreed amount of USD 45 million."

Financial Results:

Profit and Loss for the Third Quarter of 2019:

Cargo revenues decreased by approximately USD 2 million due to a decrease in the amount of cargo flown and the decreased yield per ton-kilometer due to a weakness in the global cargo market and the strong competition. In addition, there was a negative impact of exchange rates.

-  An increase of approximately USD 11 million in payroll expenses, of which USD 7 million are attributable to an increase in the actuarial liabilities due to a significant decrease in the yield to maturity of corporate bonds that were used by the Company to calculate this liability. The balance is attributable to new wage agreements, transition of pilots between fleets and negative impact of exchange rates.

-  An increase in expenses as a result of the growth in operations that was expressed by an increase of 8% in Available Seat per Kilometer (ASK);

-  A decrease of approximately USD 13.5 million in jet fuel expenses;

-  The impact of the initial implementation of IFRS 16 that moved approximately USD 8 million from the Company's operating expenses to financing expenses.

Profit and Loss for the First nine months of 2019:

-  A decrease of approximately USD 34.2 million in jet fuel expenses;

-  A decrease as a result of the implementation of IFRS 16 that moved approximately USD 20 million to financing expenses (the majority remained in expenses for depreciation of rights to use leased assets that are included in operating expenses. See Note 2.C(4) to the condensed financial statements).

-  An increase in depreciation expenses (with respect to owned assets) and a reduction in the rights to use leased assets (in accordance with IFRS 16) as a result of a growth in the Company's flight equipment with the continued receipt of the 787-9 Dreamliners.

-  An increase of approximately USD 22 million in payroll expenses compared to the first nine months of 2018, mainly due to new wage agreements and transition of pilots between fleets, and as a result of an increase in the actuarial liability, as explained above.

-  A decrease in other operating expenses, mainly due to the streamlining of some of the Company's expense items, such as air passage fees and maintenance costs, which were positively affected by the shift to the 787-9 aircraft, and as a result of the improvement in the Company's work relations.

Balance Sheet as of September 30, 2019:

Details of Conference Call

A recording of the conference call will be available to all interested parties from November 27, 2019, at 2:00 p.m., until December 4, 2019, via phone number +972-3-9255943, as well as on the Company's Investor Relations website at: www.elal.com/investor-relations as of November 28, 2019.

For further details:

EL AL Israel Airlines Ltd.

+972-3-9717439

[email protected] 

Eisenberg-Eliash Ltd.

+972-3-7538828

[email protected]