El Al President and CEO Elyezer Shkedy Today Presented the Financial Reports for the 3rd Quarter of 2013

LOD, Israel—(BUSINESS WIRE)—Elyezer Shkedy, El Al’s President & CEO: “The Company’s financial reports for the 3rd quarter of 2013 show record profits. The good results are the fruition of the business procedures and activities we adopted in various fields, and in spite of the fierce and challenging competition.

“The Company ended the quarter with a cash flow from regular activities of $56.1 million, and $184.6 million for the first 9 months of 2013 – a fine foundation for the Company’s continued advancement and development. Cash balance at the end of the period was $131.5 million, a basis that will enable us to take advantage of opportunities and to further develop growth engines and other sources of revenue.

“The number of available seats during the 3rd quarter grew by about 5% compared to in the parallel quarter of last year. Operational efficiency of the Company’s aircraft led to an increase in load factors, to about 84.8%. Nevertheless, and in spite of the increase in operations and the growth in the number of seats available, we reduced the number of employees by 27 positions.

“Once again during this quarter El Al faced intensified competition that was characterized by the increased number of seats (about 14% more) offered by the competing scheduled airlines. The main change was in the dramatic increase in the activities of Turkish Airlines to and from Israel. This is essentially incomprehensible support from Israel for the international expansion of Turkish Airlines at the expense of Israeli airlines, which are banned from flying to Turkey due to security arrangements not approved by the Turkish government. The Turkish Airlines is entitled to 126 weekly flight legs, compared to zero segments by all Israeli airlines – an amazing statistic by all accounts, one that Israel must take into account and deal with and prevent. That is the minimum required from any self-respecting country, but does not happen here. El Al has addressed the Prime Minister and the Minister of Transport on this issue, asking that clear and unequivocal directives be issued to the relevant bodies to take immediate action to provide a fair chance to Israeli airlines to compete on equal terms.

“The Company’s continued execution of its investment program, including payments on the purchase of new 737-900ER aircraft, part of the acquisition of eight aircraft (which means renewing over 20% of the Company’s fleet). The first of them arrived and began operations in late October and the second is expected to arrive at the end of this month. By the summer of 2014 a total of four new aircraft of this type will be operational for El Al.

“In accordance with the Company’s business and operational worldview, we continue to reduce the number of aircraft types and remove old aircraft. In October this year we retired our 767-200 from service – the number of aircraft types in El Al service now is four.

“As part of our efforts to reduce costs and to establish additional growth engines, there was an increase of 8% in ticket sales via the Internet for this quarter, and by about 18% for the first nine months of the year.

“There has been an impressive increase in Frequent Flyer Club activity worldwide and the club now has about 1.25 million members. We are working to change the club’s operating model. The new format will be completed soon and will be submitted to the Board of Directors for approval.

“In the third quarter the Company continued the development, promotion and evolution of the strategic plans in response to trends in global markets and in the international aviation industry (including the open skies policy). We are introducing the initiation of Short Haul operations using Boeing 737-800s, to five European destinations. The planned implementation of this format is expected no later than the 2014 summer season schedule (beginning March 2014).

“The company has recently begun two new routes, to Venice and Larnaca. Within the framework of the Company’s modernization and service improvements we were recently awarded impressive international awards from independent external bodies. Among others, the Company was selected by the prestigious ‘Travel and Leisure’ magazine as one of 20 best airlines in the world (from hundreds of airlines); crowned by ‘Superbrands’ the ‘brand of brands’; named as one of the top five in e-commerce by GO E-COMMERCE 2013, and more. The important process of encouraging excellence and organizational culture modification, measurement and incentive in El Al continues. Over 1500 people are regularly monitored on the results of their work and are accordingly rewarded with incentives.

“I sincerely hope that the employees’ representatives will act responsibly and take immediate action to formulate a new labor agreement; an agreement that will allow fine-tuning between expenses and efficiency, and which will enable bold steps that reflect the reality of contending with the open skies policies and the increasing competition.

“I want to thank all our employees and El Al management, on the ground, in the air, in Israel and abroad for their determination and dedication in dealing with the complex and difficult challenges in the past and those before us.

“We are committed to continue providing the very finest service and products to our clients. We are also committed to our ongoing efforts to deal with the challenging market conditions."

Nissim Malki, El Al CFO and Vice President Finance, said: "The results achieved during the first nine months of this year indicate a beginning of the successful implementation of organizational and business processes in the fields of revenues, expenses and the Company’s risk management.

“The Company ended the quarter with a cash balance of about $131.5 million, after investments of about $104.4 million in the purchase of fixed assets (primarily of aircraft), and the repayment of about $63.6 million of long-term loans during the first nine months of 2013.

“During the same period cash flow from the Company’s regular operating activities amounted to $184.6 million and the capital of the Company increased from $135.8 million to $169.4 million.

“During the quarter the Company signed a Memorandum of Understanding with a foreign bank for financing the purchase of four Boeing 737-900Ers, where the financing is guaranteed by the Federal Reserve EX-IM bank that encourages imports and exports of the United States. This past October the first aircraft of this model began service with El Al. The Company’s Board of Directors approved exercising an option to purchase two additional aircraft of the same model. Thus the overall purchase transaction of these modern aircraft is of eight aircraft.

“For the first nine months of 2013 we are exhibiting amazing improvements in profitability – about 250% in gross profits, a reduction in the number of employees in spite of the increase in activities, improvement in capital and an improvement in cash flow from regular activities of about $100 million.

“All the factors portrayed above are significant indicators of the Company’s implementation of its commercial procedures, all of which we reported previously and which facilitate El Al to fortify its financial foundations."

Following are the main results:

Financial results for the 3rd quarter 2013:

Revenues for the present quarter totaled $643.3 million, compared to $605.8 million in the parallel quarter of last year, an increase of about 6.2%. Revenues from passengers increased by about 6.1%, mainly the result of the increased number of passengers carried. Cargo revenues dropped by about 0.8% largely as a result of the reduction in ton-kilometer revenues.
Operating expenses in the present quarter under review increased by about 5.6% to about $483.6 million, compared to $457.8 million in the parallel quarter of last year. The ratio of operating expenses on turnover dropped from about 75.6% in the 3rd quarter of 2012 to about 75.2% in this 3rd quarter. The growth was largely due to the increase in aviation fuel expenses and the increase in cost of salaries. Most of the increase was caused by the creeping changes in the shekel-dollar exchange rates compared to in the parallel quarter of last year, and to the increase in activities. The average number of temporary and permanent Company employees during the 3rd quarter was 6,109, compared to 6,136 in the parallel quarter of last year.
Aviation fuel costs for the Company during this quarter rose by about $3.6 million compared to in the parallel quarter of last year, a ratio of about 1.9%, and largely as a result of increased activity. During the reported quarter the Company recorded returns of $4.4 million as a result of fuel hedging transactions, which appear in the profit and loss reports. (In the parallel quarter of last year the Company had hedging returns of $5.2 million.)
Gross profits for the quarter increased by about 8% and totaled about $159.7 million (a ratio of about 24.8% on turnover), compared to $148.00 million in the parallel quarter last year (a ratio of 24.4% on turnover).
The operating profits in the 3rd quarter were about $75.6 million compared to an operating profit of $62.8 million in the parallel quarter of last year.
Net profits for the 3rd quarter of 2013 totaled $57.9 million, compared to about $37.5 million in the parallel quarter of last year.
Cash flow from regular activities during the 3rd quarter 2013 totaled about $56.1 million, compared to $13.3 million in the parallel quarter of last year.
The EBTIDA for El Al for the 3rd quarter of 2013 totaled about $100.6 million, compared to $90.4 million in the parallel quarter of last year.
Passenger load factors for the Company rose during the reported quarter and reached about 84.8% compared to 84.5% in the parallel quarter of last year.
Results for the first nine months of 2013:

Revenues for the first nine months of this year totaled about $1,604.00 million, compared to $1,551.7 million in the parallel quarter of last year.
Operating expenditure for the first nine months of 2013 totaled about $1,324.4 million, compared to $1,285.1 million in the parallel quarter of last year, an increase of about 3.1%. The change is largely the result of increased costs of salaries and aviation fuel, as well as the increased activities; also the result of the creeping changes in the average shekel-dollar exchange rates compared to in the parallel quarter of last year.
Gross profits for the first nine months grew by about 4.9%, reaching about $279.6 million, compared to $266.6 million in the parallel quarter of last year.
Operating profits for the first nine months of 2013 totaled about $46.3 million, compared to $41.4 million in the first 9 months of 2012.
Net profits for the first nine months of 2013 totaled about $29.1 million compared to about $8.2 million in the parallel quarter of last year.
El Al’s EBITDA for the first nine months totaled about $121.3 million, compared to $123.5 million in the parallel quarter of last year.
Cash flow from regular activities over the first nine months of the year totaled about $184.6 million
Additional data:

As at 30th September 2013 the Company’s cash on hand, cash equivalencies and short-term deposits totaled $131.5 million. It should be noted that during the 3rd quarter of 2013 the Company invested around $28.2 million in fixed assets, in accordance with the Company’s multi-annual investment program. The Company also repaid current loans totaling $21.5 million and obtained loans of $4.8 million.
Company equity, as at 30th September 2013 totaled $169.4 million.