El Al Estimated To Lose $50 Million: “We May Have To Make Painful Decisions”

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“There are difficult days ahead and it is possible that we will be required to take dramatic steps and make painful decisions,” El Al CEO Gonen Usishkin wrote in a recent email to company employees. The coronavirus pandemic, which is wreaking havoc on airlines and tourism worldwide, is taking its effect on Israel’s national airline.

As fear of the coronavirus began to grow last month, El Al halted flights from Tel Aviv to China, later halting flights to Hong Kong as well. The loss of Chinese tourism alone was a major financial hit being that China is the world’s largest tourism market for outbound travel.

Earlier this week El Al also reduced its flights by 50% to Thailand. There’s been a decrease in flight bookings and more and more cancellations to destinations worldwide – a phenomenon felt by airlines around the world.

“There are 5,000 Israelis in Thailand scheduled to return to Israel with El Al,” Usishkin said. “Because the demand for those flights is mainly one-way we will have to carry out additional business adjustments.”

El Al notified the Tel Aviv Stock Exchange (TASE) this week that its first-quarter revenue will be $30 million lower than the projected amount due to canceled flights and decreased new bookings in wake of the worldwide coronavirus panic.

However, El Al added that it expects to compensate for the lost revenue through its “lower operating expenses,” meaning it plans to streamline its operations to minimize the damage.

The fact that the price of oil dropped 20% to $55 a barrel this year is one factor in El Al’s projected decreased operating expenses and the price of oil is expected to drop even further as the coronavirus crisis is causing a decrease in the price of oil, lowering the price of jet fuel.

Transportation Minister Bezalel Smotrich said on Tuesday in an interview on Kan Reshet Bet that the government should help its national airline by chipping in to help cover the loss of revenue due to the coronavirus, adding that the estimated loss is about $50 million.

“The state will have to put its hand in its pocket and compensate the airlines…,” Smotrich said. “El Al is talking about losses of about $50 million. If the state wants to preserve its civil aviation, it needs to help.”

Notwithstanding the coronavirus, a recent Globes report claimed that El Al was struggling even before the coronavirus mainly due to competition at Ben-Gurion from low-cost airlines.

(YWN Israel Desk – Jerusalem)