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EL AL Israel Airlines Presented Its Financial Results, Summarizing The First Half Of 2015 And The Second Quarter Of The Year

August 15, 2015 Financial No Comments Email Email

EL AL’s CEO, David Maimon:

“I am proud to announce today the largest aircraft acquisition program in the history of EL AL. The Board of Directors of EL AL approved for the Company to conduct negotiations with Boeing Corporation for acquisition program of wide-body Dreamliner aircraft, which is expected to include the purchase and lease of 15 aircraft in the next five years.http://www.travelcounsellors.com.au/au/leisure This move is expected to constitute a significant step forward in the optimization of the network of routes, passenger service and flight experience.

“During the next five years, these aircraft shall replace the 747-400 and 767 fleets and are designated to fly to medium and long haul destinations (New York, Boston, Toronto, Bangkok, Beijing, Mumbai, South Africa and more). These aircraft are the latest and most advanced in the world, with many operational advantages, and are considered to be efficient and economical in terms of fuel consumption, utilization and maintenance.

“We shall continue to preserve our position as the first choice in flying to and from Israel, and as a leading company offering its customers maximum comfort, technological innovation and quality service. I am convinced that this move is a great opportunity to meet the high standard expected of us and will continue the momentum of EL AL’s innovation.”

David Maimon further added: “I congratulate the signing of the labor agreement with the Employee Representation union, which will enable EL AL to become more efficient and focus on the business challenges facing us, further to its growth within the international aviation industry.

“In addition, I am proud of the Board resolution to approve a dividend distribution for the first time in many years; we are happy to share the Company’ success with our shareholders.”

Maimon noted that: “The number of holders of FLYCARD and FLYCARD Premium credit cards has continued to grow, reaching over 90 thousand customers.

“As part of the Company’s innovation, route network expansion and the strengthening of the Company, EL AL launched in June a nonstop flight to Boston, thus expanding the variety of destinations in the U.S., to the benefit of our customers, at high availability with convenient connections.”

Dganit Palti, EL AL’s CFO:

“We conclude the first half of 2015 and the second quarter of the year with improvement in various operational and financial parameters and growth in the net profit of the Company.

“The Company recorded a decrease in revenues resulting from a reduction in the number of passengers due to a drop in incoming tourism and price erosion, which resulted from the decline in the oil prices, the number of tourists and from currencies devaluations in relation to the dollar. Alongside this, the Company recorded a decrease of over USD 57 million in operational costs in the second quarter, despite a 2% increase in the Company’s operations.

“In this quarter, the Company recorded a higher profit by nearly 6% than the profit recorded in the second quarter of 2014, despite an expenditure of approximately USD 11 million as a result of the new labor agreement, out of which about USD 5 million is allocated towards the cost of early retirement packages for employees.

“The Company’s cash flow deriving from operating activities in the second quarter amounted to approximately USD 79 million, and it ended the quarter with cash and deposit balances totaling approximately USD 186 million.

“The financial strength and business condition of the Company allow us to distribute a dividend and implement the Company’s long-term aircraft acquisition program for replacing wide-body aircraft, which shall highly improve the competitive ability of the Company in the coming decade.”

Financial and Operational Highlights for the Second Quarter of 2015:

  • Total Revenues – amounted to approx. USD 511 million, a decrease of approx. 10.7% compared to the second quarter of the previous year. Revenues from passengers dropped by approx. 11.9%, as a result of a decline in Revenue Passenger Kilometer (RPK), which was affected by the decrease in incoming tourism (15%) and the timing of Passover, as well as from a decrease in passenger-kilometer returns arising in part from the reduction in oil prices and the competition which was also affected by the decrease in passenger traffic, as provided above. In addition, revenues were affected by exchange rate erosion of various currencies in relation to the dollar. Revenues from cargo transport increased by approx. 0.2%, mostly as a result of an increase in the amount of ton-kilometer flown, offset in part by a decline in ton-kilometer returns.
  • Operation Expenses – amounted to approx. USD 408 million, a decrease of approx. 12.3% compared to the second quarter of the previous year, mainly due to a drop in jet fuel expenses, as a result of exchange rate erosion of various currencies in relation to the dollar, offset by salary increments resulting from the Labor Agreement executed in June 2015.
  • Jet Fuel Expenses – decreased by approx. USD 53.5 million compared to the second quarter of the last year. Said decrease resulted from the impact of the decline on the effective price of jet fuel (which includes the results of hedging operations carried out by the Company), offset in part by the 2% impact of the growth in flight hours. Jet fuel expenses as a percentage of turnover declined from approx. 31.5% in the second quarter last year, to approx. 24.8% in the Reported Quarter.
  • Gross Profit for the Reported Quarter totaled approx. USD 102.7 million, thus constituting about 20.1% of the turnover, compared to a gross profit of USD 106.3 million in the second quarter of last year, which constituted about 18.6% of the turnover in the second quarter of the previous year.
  • Selling Expenses – decreased by approx. 10.1% compared to the second quarter of the previous year, mainly due to a decline in distribution expenses as a result of the drop in revenues and salary expenses, as stated above. Selling expenses as a percentage of turnover remained without change compared to the second quarter of the previous year,i.e. about 9.4%.
  • General and Administrative Expenses – decreased by approx. 12.3% compared to the second quarter of the last year, mainly as a result of a decline in salary expense, as provided above. General and administrative expenses as a percentage of turnover decreased from approx. 4.5% in the second quarter of the previous year, to approx. 4.4% in the Reported Period.
  • Other Expenses – in the Reported Quarter, the Company recorded net other expense of about USD 4.8 million in respect of an early retirement plan for 35 employees.
  • Financing – net financing expenses amounted in the Reported Quarter to approx. USD 3.8 million, compared to approx. USD 4.9 million in the second quarter last year, as a result of income from exchange rate differentials.
  • Profit before Tax – amounted in the Reported Quarter to approx. USD 23.6 million, thus constituting about 4.6% of the turnover and a growth of approx. 4.8%, compared to approx. USD 22.6 million in the second quarter of the previous year which was 3.9% of the turnover.
  • Profit for the Period – totaled approx. USD 17.3 million, thus constituting about 3.4% of the turnover and a growth of approx. 6.2%, compared to a profit of nearly USD 16.3 million in the second quarter of the previous year, which was about 2.9% of the turnover.

Financial and Operational Highlights for the First Half of 2015:

  • Total Revenues – amounted to approx. USD 930 million, a reduction of approx. 5.7% compared to the first half of the previous year. Revenues from passengers decreased by approx. 6.5%, mainly as a result of a drop in passenger-kilometer returns due to exchange rate erosion of various currencies in relation to the dollar and the reduction in oil prices, and due to the competition, which was affected by the decrease in incoming tourism (14%), offset by an increase in Revenue Passenger Kilometer (RPK). Revenues from cargo transport increased by approx. 1.0% as a result of an increase in the amount of ton-kilometer flown, offset in part by a decline in ton-kilometer returns.
  • Operation Expenses – amounted to approx. USD 775 million, a decrease of about 10.2% compared to the first half of the previous year. Said decrease resulted from a decline in jet fuel expenses and salary expenses mainly due to wages erosion resulting from the NIS exchange rate depreciation in relation to the dollar, offset by an increase in salary due to the Labor Agreement executed in June 2015.
  • Gross Profit – amounted to approx. USD 155.2 million, thus constituting about 16.7% of the turnover, compared to a gross profit of USD 123.9 million in the first half of last year, which was about 12.5% of the turnover.
  • Selling Expenses – decreased by approx. 7.3% compared to the first half of the previous year, as a result of a decline in distribution expenses and salary expenses, mostly due to the strengthening of the dollar.
  • General and Administrative Expenses – decreased by approx. 13.8% compared to the first half of the last year, as a result of a decline in salary expense, due mainly to the strengthening of the dollar, and a decrease in doubtful debt expenses.
  • Other Income and Expenses – in the first half of 2015 the Company recorded other expense of about USD 4.8 million in respect of an early retirement plan for 35 employees. In the first half of 2014 the Company recorded net other income of about USD 4.9 million, mainly due to recording of capital gains from sale and leaseback of two engines.
  • Financing – net financing expenses amounted to approx. USD 11.6 million, compared to approx. USD 10.1 million in the first half last year.
  • Profit before Tax – amounted to approx. USD 1.9 million, thus constituting about 0.2% of the turnover, compared to loss before tax of approx. USD 32.3 million in the first half of the previous year, which was 3.3% of the turnover.
  • Profit for the Period – totaled approx. USD 1.3 million, thus constituting about 0.1 of the turnover, compared to a loss of nearly USD 23.4 million in the first half of the previous year, which was about 2.4% of the turnover.

Additional Data as of June 30, 2015:

  • Current Assets – amounted to approx. USD 443 million, reflecting a growth of about USD 154 million compared to December 31, 2014. This growth resulted mainly from a seasonal effect of an increase in cash and customer balances, offset by a decrease in pledged deposits.
  • Non-Current Assets – amounted to approx. USD 1,306 million, reflecting a growth of about USD 13.2 million compared to December 31, 2014, mainly as a result of acquisition of a 737-900 aircraft and from payments on account of three more 737-900 aircraft, offset by depreciation expenses for the period.
  • Current Liabilities – amounted to approx. USD 949.0 million. This growth of about USD 141.2 million compared to December 31, 2014 mainly resulted from a seasonal increase in revenue from the pre-sale of airline tickets and from an increase in short-term credit, mostly due to the financing of advance payments for aircraft, offset by a decrease in the Derivative Financial Instruments section.
  • Non-Current Liabilities – totaled nearly USD 655.1 million, thus constituting a decrease of approx. USD 7.3 million compared to December 31, 2014. The difference resulted from repayment of loans, offset by a loan received in March 2015 to finance the acquisition of a 737-900 aircraft, the fifth in the series.
  • Equity – amounted to approx. USD 145.0 million, reflecting a growth of nearly USD 33.6 million compared to December 31, 2014, which mainly resulted from an increase in the capital fund in respect of cash flow hedging resulting from an increase in the fair value of the hedging transactions.

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