Israel's El Al looks to new planes to reassert dominance

Thu Dec 15, 2016 4:59am EST
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By Steven Scheer

JERUSALEM (Reuters) - Israel's national airline, El Al (ELAL.TA: Quote), is betting on a billion-dollar overhaul of its ageing fleet to claw back market share dented by relentless competition from low-cost carriers and a damaging dispute with pilots.

El Al was once the go-to airline for most Israelis thanks to the kind of stringent security that sees it equip planes with missile defense systems. But it has frustrated customers over the past decade with an ageing fleet that has borne poor comparison with competitors which offered newer jets fitted with the latest in hi-tech entertainment and comfort.

The average age of its 19-strong long-haul fleet of Boeing 767s, 747s and 777s is 18 years, with 14 of them more than 21 years old. By contrast Turkish Airlines, the second-largest carrier operating in Israel after El Al, has a fleet that averages four years for its long-haul 777s and Airbus A330s.

Dganit Palti, El Al's chief financial officer, acknowledged upgrading the fleet was a pressing need for the company. Next year, the carrier will start to receive the first of 15 787 Dreamliner planes in a $1.25 billion deal. It also has an option to buy 13 more 787s, which are 20 percent more fuel efficient.

"In 2020, when we finish replacing all wide-body planes, the average (age) will be six years," Palti told Reuters. "The Dreamliner and the replacement of the wide-body fleet will give us a big advantage."

El Al's fleet issues have been magnified by Israel's 2013 open-skies agreement with the European Union that has allowed more low-cost airlines like easyJet (EZJ.L: Quote) and Wizz Air (WIZZ.L: Quote) to operate services to Israel, presenting travelers with a wide assortment of prices, flying times and days, and connections.

The past year has also been a particularly punishing one due to a dispute with its 600 pilots, who on average were earning $25,000 a month because of generous overtime and other benefits, which hit the airline's profit margins.

By comparison, a pilot at Lufthansa, among the most well paid in Europe, earns on average $190,000 a year before tax, though a captain on the highest pay level can earn as much as $23,400 a month before tax.   Continued...

An El Al Airlines aircraft is seen at Ben Gurion International Airport near Tel Aviv, Israel July 14, 2015. REUTERS/Nir Elias/File Photo