El Al President Elyezer Shkedy today presented the financial reports for the first quarter of 2013
Company revenues for the quarter totaled $431 million, similar to the first quarter of 2013
Losses for the first quarter were about $32.5 million, compared to a loss of $23.3 million in the parallel quarter of last year (which included one-time capital gains of $9 million as a result of the sale of two jet engines)
Cash flow from regular activities in the present quarter totaled $80.5 million compared to a cash flow of $65 million in the parallel quarter of last year
Load factors on passenger flights totaled 81.7% compared to load factors of 81.2% in the parallel quarter of last year
El Al’s market share dropped from 36.6%
to 34.7% in the first quarter of 2013
Operating expenses in the current quarter were $393.1 million compared to $388.6 million in the parallel quarter of last year, an increase of about 1%
Gross profit for this quarter totaled $37.9 million (a ratio of about 8.8% on turnover), compared to $40.5 million in the parallel quarter of last year (a ratio on turnover of 9.4%)
The Company showed an increase of 23% in direct internet sales in comparison to the first quarter of 2013
As at the 31st March 2013, the Company’s equity totaled $109 million, compared to $136 million as at 31st December 2012
Elyezer Shkedy, El Al President & CEO: “First 2013 quarter results were still influenced by Operation Pillar of Cloud which affected this quarter, in addition to the effects of the stiff competition in international civil aviation.
“The Company is always adjusting itself to changing conditions; we reduced activities and continued to become more efficient. During the first quarter of 2013 the Company reduced the volume of its activities compared to in the parallel quarter of last year. Operating the Company’s aircraft more efficiently raised our average load factors to about 81.7%.
“We continue tenaciously to adjust the Company to the changing commercial conditions and to meet the increasing market competition plus the challenging changes in international and local aviation. To this end we are implementing plans to reduce expenses and to reduce work force.
“As a result of our efforts to become more efficient and to establish additional growth engines, we recorded a 23% increase in internet ticket sales.
“In response to market conditions in international civil aviation (including the new open skies policies) El Al Board of Directors approved the start of a program for short haul flights on four 737-800 aircraft to nearby destinations (destinations to be decided by the Company’s management) starting no later than in the 2014 summer schedule. More recommendations by Management concerning other activities, the Frequent Flyer Club, the organizational structure, adjusting activities of long-haul flights and adding more short-haul aircraft (beyond the four mentioned above), will be brought to the Board for approval as soon as plans are finalized. The Board has already instructed Management to continue making the Company more efficient.
“The Company continues planning to maintain a young fleet of both narrow- and wide-body aircraft. El Al has finalized the purchase of six narrow-body 737-900 aircraft from the Boeing Company. The first aircraft of the six will enter service in October 2013.
“El Al signed a contract with FIMI Funds, according to which FIMI is likely to invest up to $75 million in El Al. FIMI’s obligations to execute the agreement is subject to several conditions, including approval by a general meeting of the Company; receiving regulatory permission, and El Al’s signing a new labor contract with the employees. The labor contract must include conditions that meet FIMI’s approval.
“I do hope that El Al employees are aware of the importance of reaching a new collective labor agreement that will guarantee the Company’s, growth and development. I anticipate that the El Al employees’ representatives will enter into immediate negotiations so that a new agreement can be reached which will, among other things, enable FIMI Funds to invest in El Al and also enable the Company to adapt to the open skies policies and to face the competition successfully.
“May I take this opportunity to thank the entire El Al ‘family’, on the ground, in the air, in Israel and abroad, for their determination and devotion to meet the complex challenges that we faced this past quarter.
We are committed to offering our clientele the very finest services and products. And we are committed to ongoing efforts to overcome the challenging market competition.”Financial and operational highlights of the 2013 first quarter
- Revenues for the present quarter totaled $431 million, compared to $429.1 million in the parallel quarter of last year, an increase of about 0.2%. Net revenues from passengers increased by about 2%. Cargo revenues dropped by about 11.5% as a result of a reduction in ton-kilometers flown and a drop in the yield per ton-kilometer.
- Operating expenses in the quarter under review totaled about $393.1 million, compared to $388.6 million in the parallel quarter last year, an increase of about 1%. Expenditure on aviation fuel increased by about $7.1 million compared to in the parallel quarter of last year, an increase of about 4.8%. Market prices for jet fuel dropped by an average of about 0.7% during the quarter, compared to in the parallel quarter of 2012. In this quarter the Company recorded returns on fuel hedging of about $4.1 million, as reflected in the profit and loss reports. (In the parallel quarter of last year the Company had hedging returns totaling about $14.5 million). In the fair value of hedging operations which are not recognized for accounting purposes there was a drop which is reflected in the profit and loss reports and which thus increased the expenditure on jet fuel in the quarter by about $0.9 million (compared to an increase of about $2.6 million in the parallel quarter of last year). The reduction in activities reduced fuel costs for the quarter by about $5.5 million. Total fuel costs for the quarter represented about 39.1% of total operational expenditures, compared to 37.7% in the parallel quarter of last year.
- Gross profits for the quarter totaled about $37.9 million (a ratio of about 8.8% on turnover), compared to $40.5 million in the parallel quarter last year (a ratio of 9.4% on turnover).
- Cost of salaries in the first quarter of 2013 rose in comparison to those in the parallel quarter of last year, to about $3.6 million. Most of the increase is the result of the strengthening of the shekel vis-à-vis the dollar exchange rates, compared to in the parallel quarter of last year, and the creeping increases in salary increases. On the other hand the number of employees dropped this quarter.
- Cost of sales totaled $46.3 million compared to $48.4 million in the parallel quarter of last year, a drop of about 4.0%. The ratio on turnover dropped from 11.3% to 10.7%.
- Management and general cost totaled $25.6 million compared to $24.7 million in the parallel quarter of last year, an increase of about 4%.
- The operating loss reached $36.3 million compared to an operating loss of $23.8 million in the parallel quarter of last year.
- Financing cost during this quarter total $7.1 million, compared to net financing costs of $8.2 million in the parallel quarter of last year. The change is largely the result of the benefits of income from foreign currency hedging but that was set-off by the increases caused by changes in exchange rates.
- Losses for the first quarter of 2013 totaled $32.5 million, compared to losses of $23.3 million in the parallel quarter of last year.
- Cash flow from regular activities during the quarter which ended on 31st March 2013 totaled $80.5 million, compared to cash flow from regular activities of $65 million in the parallel quarter of last year.
- As at 31st March 2013 the Company’s cash on hand, cash equivalencies and short-term deposits totaled $93.4 million. It should be noted that during the first quarter of 2013 the Company invested $46.4 million in fixed assets, and also repaid current loans totaling $20.9 million.
- The Company’s equity as at the 31st March 2013 stood at around $109 million, compared to $136 million as at 31st December 2012.
Nissim Malki CFO and Vice President Finance: “It is well known in civil aviation that the first quarter reflects strong seasonal changes, and that the Company must make large preparations in respect of the coming top high-season quarters (spring and summer); which investments are not fully utilized in the weaker quarters.
“One can observe the same factors when reviewing the activities of most foreign airlines.
“When comparing the parallel quarters of 2012 and 2013 (and ignoring the capital income resulting from the sale of aircraft engines) one sees that they are quite similar both in revenues and expenditures. We adjusted seat capacities and thus were able to moderate the damage that might have resulted from the reduced demand for seats.
“During this quarter we carried out our planned investment programs, including investing in aircraft and infrastructure. This is the first quarter that is being reported using the new SAP system which represents an infrastructure improvement for the Company’s financial management.
“We invested $46.4 million in fixed assets and repaid long-term debts totaling about $20.9 million, thus meeting all or obligations since the start of 2013.
“As to the balance sheet, allow me to point out that the negative change to the equity resulted from changes in accounting standards (IAS 19) and from the losses in this quarter.
“In conclusion I would emphasize that El Al’s robust cash flow enabled the Company to achieve all its targets and will most certainly serve to maintain the momentum of investing and gaining efficiency.”
Conference Call Details
On Monday 27th May 2013, at 12:15 midday El Al’s management will hold a conference call, in which the Company’s financial results for the 1st quarter of 2013 will be reviewed. The call conversation can be heard by dialing
[+972] (0)3 918-0610. A recording can also be heard from 17:00 on the 27th May 2013, and until the 3rd June 2013, by calling  (0)3 925-5921.