After gaining a virtual monopoly on many routes to and from Israel, hiking fares and reporting record profits, El Al Israel Airlines Ltd. (TASE:ELAL) is embarking on a spending spree to buy new aircraft for $2-2.5 billion. Earlier this year El Al signed a deal to buy three Boeing Dreamliners.
El Al, controlled by businessman Kenny Rozenberg and managed by CEO Dina Ben Tal Ganancia, reported last night that it is moving forward on a purchase and lease deal to buy 30 Boeing 737 MAX aircraft. This will be the biggest ever aircraft purchase deal in Israel’s history. El Al reports that the board of directors has approved the move to conduct exclusive talks with aircraft manufacturer Boeing and with aircraft leasing companies in order to complete the deal.
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The new aircraft will gradually replace El Al’s existing fleet of Boeing 737s and will expand the carrier’s fleet of narrow bodied passenger jets. The aircraft will be delivered over several years starting from 2027. El Al said that the schedule for concluding negotiations and signing a preliminary offer document with Boeing for the purchase of aircraft is expected to take several more weeks, in which time the company will also begin talks with aircraft leasing companies.
El Al stressed that there is currently no certainty that a binding agreement will be signed or that the transactions with Boeing or with aircraft leasing companies will be completed. In order to meet the financing cost of the deal, the company raised capital earlier this year.
El Al was boosted after foreign airlines halted flights to Israel
El Al’s first quarter 2024 financial results published two weeks ago showed how the war has benefitted the Israeli airline’s business performance. This was mainly due to the fact that most foreign airlines halted flights to Israel. The first quarter is usually considered the weakest for airlines (the winter season) but the results were the best-ever in El Al’s history with revenue of $738 million, up 47% from the first quarter of 2023, and better than last summer’s revenue.
With its de-facto domination of Israel’s skies, controlling 62% of the passenger traffic at Ben Gurion airport, El Al reported net profit of $80.5 million in the first quarter of 2024, compared with a net loss of $34.4 million in the corresponding quarter of 2023, and net profit of $40 million in the fourth quarter of 2023. The huge profit erased almost half of the deficit in El Al’s equity, which now stands at $91 million.
El Al’s market cap is currently NIS 1.77 billion and the company’s share price has risen 25% since the start of the year.
Published by Globes, Israel business news – en.globes.co.il – on June 11, 2024.
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