“The Corona is still with us but El Al will be a completely different company when it returns to 75% or more activity along with the critical moves we make when following and after the Corona there will be an improvement of at least $ 150 million,” said Avigal Sorek, CEO of El Al after the reports The Company’s financials for the third quarter.
In a conversation with reporters after the reports, EL AL management continues to complain and explain about “unfair competition” compared to other companies. For example, El Al can not fly over Saudi Arabia – that’s true but how is it relevant? El Al was not established today. There are known limitations for Israeli companies, this is the reality and EL AL must deal with it. Complaining all the time that it is “not forces” only reinforces the assessment that perhaps the generous government support is unnecessary.
> Let God die – there is no reason to provide her with oxygen; Need to be eliminated and rebuilt; “The public should not save a company with high salaries”
El Al’s new management is making an effort to show that the Otto change is coming and is just around the corner. She deserves a grace time to try to succeed with the recovery plan, but in the meantime El Al continues to record huge losses. Although revenues continue to rise, with revenues rising 13% to $ 253 million in the current quarter compared to $ 222.6 million in the previous quarter, El Al is still recording a gross loss of $ 17.1 million. And when a company like El Al records a gross loss, it means that it sells tickets at a price lower than its cost, something along the lines of – “We sold tickets for NIS 800 and it cost us NIS 1,000, even before operating expenses.” The situation is distorted, but El Al claims that ticket prices are on the rise.
El Al declares that “at the moment there is a shortage of capacity but ticket prices will go up. We will return to a gross margin of 40%. If not in the next quarter or the one after that then next summer. “$ 1 million and that will be the change. The rise in fuel prices to $ 85 per barrel has also hurt us.” In the past, oil prices also stood at more than $ 100 a barrel and it is quite problematic for the company to rely on the hope that prices will go down, and it will of course have to hedge oil prices. And yet – improving profitability is a great achievement.
The company is proud to have managed to “maintain a positive operating income (EBITDAR) for the third consecutive quarter” but it is not clear that there is anything to be proud of. What is it anyway – EBIDAR, every day you can find-invent a financial-given off-balance sheet financial ratio that sounds and looks good. And also – this is an EBIDAR of $ 3 million in total, a fall of 83% compared to the previous quarter. The operating loss jumped 90% to $ 109 million, compared to $ 57.4 million in the previous quarter. The company explains that the fall is due to a significant reduction in the realization value of about $ 43 million of two Boeing 777 aircraft, and also due to financing expenses in the amount of about $ 5.3 million that the company recognized as a result of the agreement with the state to pre-finance airline tickets. Aviation security.
El Al’s net loss in the third quarter amounted to $ 136.2 million, compared to $ 81 million in the previous quarter – a jump of 68%. Cash flow from operating activities fell to the negative range of $ 86.6 million, compared to a positive cash flow of $ 150.6 million. According to the company, neutralizing past debt cash flow was negative at the level of $ 25 million, of which lease payments and interest of $ 26 million.
The company’s DSL expenses increased by $ 54 million compared to expenses in the corresponding quarter last year, as a result of an increase in the amount of fuel consumed by the company’s aircraft – by 10 times compared to the corresponding quarter. The company also reports that “Compared to about $ 40 million in the corresponding quarter, mainly due to an expense of $ 14.4 million recorded in the corresponding quarter last year in respect of DSL hedging transactions which at the time were not recognized as effective due to hedging a large amount of DSL than the amount consumed.”
El Al explains that although in the current quarter there is a 35% increase in the volume of flights, and a 44% increase in revenue per passenger, the company is still only 38% of its full activity and you have potential to grow – the problem is that the company still loses gross and the question is how it Get over it.
Meanwhile, EL AL’s accountants are also unsure that it will be able to survive a year successfully, and continue to write a “live business” note in the company’s reports. The company claims that this is the company’s decision to “act conservatively” and therefore it decided to leave a live business comment in the reports, and that it is believed that it will be removed in the near future – but in the meantime it is more a wish than a reality. That does not mean ask for can not succeed, but it does mean that it is still a high-risk company.
What is positive after all?
Looking ahead, El Al is presenting $ 73 million in advance orders in September and $ 122.4 million in October orders in advance – this is not, of course, revenue that Al Al will be able to recognize in the next quarter, but it is a 68% increase in future orders. The company of course connects all these revenues and presents them together but for it it is progress and improvement compared to the quarter that has now ended.
The company reports a 32% increase in ticket sales revenue in the third quarter, which reached $ 184.3 million compared to the previous quarter.
How is the company trying to handle the challenge?
El Al laid off 1,900 additional employees, during an important process for the company. The company also fought to get more aid from the state – and it did succeed in defeating the state again and receiving an additional $ 103 million in aid, with controlling shareholder Eli Rosenberg pouring in $ 63 million in four stages by February 2022, and the state pouring in another $ 20 million with the option to increase To $ 30 million, after the state had already agreed to inject $ 210 million into El Al several months ago. Expenditure on workers returning from sick leave increased by $ 51 million.
El Al will also extend the Khalat to about 1,100 employees by the end of 2021 and will also sell most of its frequent flyer club – through the introduction of a ‘strategic partner’, and also pledged that by the end of January it will raise at least $ 100 million against the club. In addition, as promised by EL AL to the Ministry of Finance, it will raise $ 105 million by September, while El Al plans to repay past debts to customers of $ 340 million.
El Al has already reported in previous reports that it intends to enter the field of tourism and hotels – in fact with the aim of expanding its options so that it will not only depend on aviation and the Corona epidemic, but so far it does not report progress on the issue. El Al is also examining the possibility of acquiring Arkia and merging the activity, and in this area as well, the company has not yet reported any progress.
The company has 45 passenger aircraft, of which 27 are owned by the company and 18 are leased by the company.
El Al plans to carry out $ 45 million refinancing agreements for aircraft, and also anticipates efficiencies in unpaid expenses amounting to tens of millions of dollars per year.
Expect revenue to rise next quarter – likely, of course, assuming the world continues to open
Looking to the next quarter, El Al will of course not commit to specific results and only say that: “The company estimates that sales in the fourth quarter of 2021 will be high relative to third quarter sales, and will reflect the recovery trend and gradual return to the company’s operations.” And the impact of the third vaccine campaign, along with the easing of transatlantic movement between the US and Europe and FDA approval for children under 12, the company expects continued positive momentum in the industry and in the company’s operations throughout 2022. ”
Bottom line – Meanwhile, El Al continues to lose, blaming the corona and the whole world, and also continues to ask for more assistance from the state (we told you it will not end in the previous round of requests) – but it is not clear why the state should continue to save such a losing company.
We are asked why we think the company should not be supported, and we will repeat it again – the company has reached its dismal state, not because of the corona, it was “walking dead” years before the corona. Militant workers’ committees, covert unemployment, pilots impersonating patients in order to receive a wage increase, invalid norms, it is not possible for a company to succeed. The company lost, but no one really cared – everyone relied on the government. In our opinion – there is no need to support someone who is guilty of their condition in the first place. It’s not the corona that killed El Al, it’s its employees.