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EL AL Israel Airlines Presented Today its Financial Results, Summarizing the Year 2015 and the Fourth Quarter of the Year

March 29, 2016 Financial No Comments Email Email

Mr. David Maimon, EL AL‘s CEO:

“Thanks to excellent employees, a dramatic improvement of operational efficiency due to the drop in fuel prices, the entry of new aircraft, a modular pricing for UP-branded flights which increased the demand, a considerable investment in the electronic commerce website and signing on an historical wage agreement we present record results.http://www.lagunaphuketgolf.com/

EL AL is currently positioned at the top of the list of global airlines, not only in terms of the return to investors, but also in terms of innovation, being known as the startup nation. I hope we will soon sign on a wage efficiency agreement with the pilots, which will allow further efficiency and enhancement of their wages by dividing the savings between the Company and the pilots, and thus we shall be able to continue the accelerated development of the Company, in view of the increased competition in the global aviation market.”

Mrs. Dganit Palti, EL AL’s CFO noted that:

“We are pleased to conclude the year 2015 with record profitability results and significant improvement in the operational, cash-flow and financial parameters. The Company recorded an increase of 8% in the number of passengers, thus maintaining stability in the revenue cycle, despite revenue erosion due to exchange rate changes (mainly Euro) and decrease in flight prices as a result of the competition and the drop in fuel prices. The Company’s operating expenses decreased in 2015 by USD 210 million, mainly due to the drop in fuel prices, despite the growth in the scope of the Company’s operations. The Company makes efforts to reduce costs and continue the improvement of its operating parameters. The improvement of the results and the Company’s financial stability are reflected, inter alia, in a sharp increase in EBITDA, totaling approx. USD 331 million, and in the high liquidity reflected in the Company’s cash reserves and deposits, which amounted in the end of 2015 to approx. USD 189 million.

Simultaneously with the publication of the financial results, we announced an additional dividend distribution of USD 15 million, following the USD 25 million distribution carried out last August.

In recent days, three new narrow-body 737-900 aircraft were received by the Company, which were financed by Israeli banks, a move that demonstrates the confidence of the local banking system in the financial strength of the Company and its long-term work plan.”

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Results for the Year 2015:

1. Revenues from Operation – amounted to approx. USD 2,054 million, reflecting a drop of approx. 1.3% compared to same period of the previous year. This drop is mainly due to revenues from the Company’s passenger flights, which were affected by several opposite trends. On the one hand, revenues were favorably affected as a result of a growth in the number of passengers at Ben Gurion Airport. On the other hand, the Company’s revenues were adversely affected as a result of the drop in flight prices in the reporting year, mostly due to the increased competition and the impact of the drop in fuel prices. Additionally, the Company’s revenues were significantly adversely affected by exchange rate erosion of various currencies in which some of the Company’s sales transactions are carried out (mainly Euro) in relation to the dollar. It should be noted that said erosion of currencies was positively reflected in the Company’s expenses that are denominated in these currencies.

2. Operation Expenses – decreased in 2015 to approx. USD 1,593 million, reflecting a drop of approx. 11.6% compared to 2014. Most of the decrease in the Company’s operation expenses mainly result from the sharp drop in the Company’s jet fuel expense, which declined at a rate of approx. 32% compared to the corresponding expenditure of the previous year (including hedging impact), as a result of a significant decline in jet fuel prices. This decline was partly offset by an increase in the volume of jet fuel consumed due to the growth in the scope of the Company’s operations. In addition, a drop was recorded in the Company’s air navigation fee expenses despite the increase in the scope of operations, which is mainly attributed to a positive impact of the erosion of the Euro in relation to the dollar, and a growth of approx. 15% was recorded in the depreciation costs, mostly as a result of an increase in the Company’s flight equipment and from a change in estimate for the Company’s Aircraft Acquisition Program of wide-body aircraft.

3. Salary Expenses – the total salary expenditure of the Company in 2015 dropped compared to last year as a result of the strengthening of the dollar in relation to the NIS, including positive effects of the hedging of exposure. The decrease in salary expenses was offset in part by the increase in personnel due to the growth in the scope of operations, as a result of implementing the wage agreement executed in June 2015, as well as a provision for employees and management bonuses grant which was recognized in 2015 and not distributed last year.

4. Selling Expenses – a decrease of approx. 3.6% was recorded compared to 2014, mainly as a result of a drop in distribution expenses and in salary expenses due to the strengthening of the dollar, as explained above, offset by an increase in advertising expenses.

5. General and Administrative Expenses – a decrease of approx. 7.5%  was recorded compared to 2014, mainly as a result of a decline in salary expenses, due to the strengthening of the dollar.

6. Income and Other Expenses – during 2015 the Company recorded net other expenses of approx. USD 3.3 million, mainly in respect of an early retirement plan, offset by a capital gain from the sale of a 737-700 aircraft. On the other hand, in 2014, the Company recorded net other expenses of approx. USD 11.5 million, mainly as a result of registering capital gains from sale and lease-back of two engines and cancellation of a provision for certain legal claims.

7. Financing Expenses – net financing expenses amounted in 2015 to approx. USD 26.0 million, similar to the USD 26.6 millionrecorded in the corresponding period of the previous year.

8. Profit for the year – profit before tax amounted in 2015 to approx. USD 144.6 million and net profit to approx. 106.5 million, which is about 5.2% of the turnover, compared to loss before tax of approx. USD 38.3 million and net loss of approx. USD 28.1 million in the corresponding period of the previous year.

Results for the Fourth Quarter of 2015:

The main trends that affected the results of the fourth quarter of 2015 compared to the fourth quarter of last year are substantially similar to the trends explained in the analysis of the annual results, including due to changes in the Company’s revenues as a result of the increased competition on the one hand, and the growth in the number of passengers on the other hand, as well as the decrease in operation expenses mainly as a result of the drop in jet fuel prices.

1. Revenues from Operation – amounted to approx. USD 476.3 million, reflecting a decrease of approx. 3.4% compared to the fourth quarter of last year.

2. Operation Expenses – declined to approx. USD 379.1 million, reflecting a decrease of approx. 14.1% compared to the fourth quarter of last year.

3. Profit for the Period – profit before tax amounted to approx. USD 16.2 million and net profit to approx. USD 12.2 million, which is about 2.6% of the turnover, compared to loss before tax of approx. USD 19.9 million and net loss of approx. USD 14.8 million in the fourth quarter of last year.

Additional Data as of December 31, 2015:

1. The Current Assets of the Company amounted to approx. USD 394.3 million, reflecting a growth of approx. USD 105.9 million compared to December 31, 2014. This growth mainly resulted from an increase in cash and short-term deposit balances due to the improvement in the Company’s operating results.

2. Cash and Deposit Balances – amounted to approx. USD 189.2 million, reflecting an increase of approx. USD 86.4 millioncompared to the end of 2014.

3. The Current Liabilities of the Company amounted to approx. USD 843.1 million. This growth of about USD 35.3 millioncompared to December 31, 2014 mainly resulted from an increase in short-term credit, mostly due to the financing of pre delivery payments in respect of the 737-900 aircrafts, which were received by the Company after the date of the Report.

4. Working Capital – the Group has a working capital deficit of approx. USD 448.8 million compared to a deficit of approx. USD 519.3 dollar as of December 31, 2014. It should be noted that a substantial part of the working capital deficit does not reflect short-term cash flows, as explained below. The Company’s current ratio as of December 31, 2015 amounted to approx. 46.8% compared to 35.7% as of December 31, 2014. The working capital deficit consists of three substantial components which are included in the Company’s current liabilities items and are characterized by current business cycle; however, the Company is not required to use cash-flow sources in the short term in order to repay these components, which are: pre-sale of airline tickets and prepaid revenue from Frequent Flyer program, that are to be settled by providing future flight services. And by means of vacation liabilities to employees, which are expected to be paid over several years but are classified as a short-term liability in accordance with accounting principles. These components are affected, inter alia, by the seasonality of the activity and the timing of the holidays.  Another substantial component consists of short-term loans to finance pre delivery payments for the acquisition of new 737-900 aircraft, which the source for repayment are long-term loans taken upon receipt of the aircraft.

5. Non-Current Assets – amounted to approx. USD 1,269.9 million, reflecting a decrease of approx. USD 23.3 million compared to December 31, 2014, which arises from a growth in the composition of the Company’s assets as a result of receiving the fifth 737-900ER aircraft in the series, whereas on the other hand, said decrease results from current depreciation expenses incurred by the Company and from the sale of an 737-700 aircraft which took place close to the end of the reporting year.

6. Non-Current Liabilities – totaled approx. USD 626.3 million, indicating a decrease of approx. USD 36.1 million compared toDecember 31, 2014. Said decrease arises from loans repayment, offset by a loan received in March 2015 to finance the acquisition of a 737-900 aircraft and by an increase in deferred tax liability as a result of the profit before tax for the period.

7. Equity – amounted to approx. USD 194.8 million. The growth of nearly USD 83.3 million compared to equity as of December 31, 2014, mainly resulted from the net profit for the year, which amounted to approx. USD 107 million, offset by a dividend paid in the reporting year, in the amount of approx. USD 24.7 million.

8. Cash Flow from Operating Activities – in 2015, the Company had a positive cash flow from operating activities in the amount of approx. USD 271.4 million compared to a positive cash flow from operating activities in the amount of approx. USD 163.4 million in 2014. Said increase mainly resulted from the improvement in profit before tax in the reporting year compared to last year, as specified above. It shall be further noted that in 2015, the Company paid approx. USD 33 million in respect of expiry of hedging transactions that were not recognized in terms of accounting, which the loss resulting therefrom, in its most part, has already been recognized in 2014. Said payment reduced the Company’s cash flow from operating activities in the reporting year.

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