El Al President Elyezer Shkedy Today Presented the Financial Reports for the 4th Quarter of 2013

LOD, Israel—(BUSINESS WIRE)—Elyezer Shkedy, El Al’s President & CEO: “The Company commercial financial results for 2013 reflect our leadership activities in various sectors. We ended the year with a profit of $25.4 million. The Company showed an increase of 4% in revenues as well as significant increases in cash flow and capital.

“The Company ended 2013 with a solid cash flow from regular activities – about $185.3 million. This is a remarquable improvement versus a cash flow of $78.3 million in 2012 and a good basis for advancing and developing the Company. The Company had a cash balance of about $99 million, which is a good basis that will aid in making investments and developing growth engines and additional sources of revenue.

“In 2013 the Company dealt successfully with the intensified competition which was reflected in the 9% traffic increase at Ben Gurion Airport. El Al increased its seat capacity on offer by about 5%. Passenger load factors stood at about 82.9%.

“The substantial change in passenger traffic figures at Ben Gurion Airport was the result of the dramatic increase in the number of flights by the various Turkish airlines flying to Israel. This is a direct result of the massive support by the State of Israel of the international expansion of the Turkish airlines at the expense of Israeli airlines, which are prevented from flying to Turkey. This is in spite of the promises by various governmental bodies.

“The Company continues with its investment plan, including investing in the purchase of new Boeing 737-900 aircrafts – part of the purchase deal of eight aircraft. Two of these are already in service for El Al. The 3rd 737-900 of this purchase will enter service with the Company at the end of this month, while the 4th is expected to arrive before the coming summer season. We will have a total of four of these new aircrafts before the summer of 2014. The other four will enter service with El Al by 2016.

“The Company concluded attractive financing agreements with international financial institutions. Amongst others, the Company raised financing in two issues in the USA bond market to the value of about $200 million.

“As part of the Company commercial and operational world view, we continued to reduce the number of aircraft types. Older aircraft were retired – last October we saw the last of our 767-200 leave our service. The Company’s fleet today has only four aircraft types.

“As part of our strategic efforts at increasing efficiency and establishing additional growth engines, we recorded a 19% growth in internet ticket sales. The activities of our frequent flyer club in Israel and abroad is increasing remarkably. There are now about 1.3 million members. We are presently changing the operation framework of the club and about to launch a branded credit card in cooperation with financial institutions.

“As a result of the agreement with the Ministry of Finance and with the government over the ‘open skies’ policy, and its operations, the government’s participation in El Al’s (and other Israeli airlines’) security costs grew to 97.5%. This is to enable us to compete fairly. We hope and expect that the State will take all the necessary steps to ensure fair and equal opportunities for all Israeli airlines to compete – without the restrictions concerning in security.

“In response to international market trends and the changing needs of international civil aviation (including the open-skies policy), El Al launched its own new low-cost airline brand: UP. Thus we join the trend in international aviation and other big world airlines: we respond to the range of preferences of our customers. The UP brand enables passengers to build / buy the product that best serves their needs. On 30th March, five 737-800s will begin flying under the UP brand to Berlin, Budapest, Larnaca, Kiev and Prague.

“Thanks to the innovations and improvements to our services and products that have taken place recently, El Al won several important international awards from independent outside entities. Amongst others: the Company was chosen (from hundreds) as one of the world’s 20 best airlines by the prestigious international magazine ‘Travel & Leisure’; was selected as the ‘Brand of Brands’ by SUPERBRANDS (El Al together with Coca Cola and Teva Pharmaceuticals); was selected as one of the top five Companies for electronic commerce by GO E-COMMERCE 2013; and more.

“2013 saw the continuation of an important El Al organizational policy: over 1570 people were successively rated according to their productivity and were then rewarded appropriately with incentives.

“We remain committed to offering our clients services and products of the highest possible standards, and to continue our efforts to overcome the challenging market conditions.

“I’d like to thank everyone in the Company – on the ground, in the air, in Israel and abroad – for four years of cooperation. Thanks to their high standards, determination, devotion and caring, we succeeded in stabilizing and advancing the Company. I am convinced that they will continue to steer the Company to further success and achievements.

“I would also like to personally thank the Chairman of the Board of Directors, Amikam Cohen, the entire Board and the Company’s Management for the teamwork and for four fruitful years of working together.

“My sincerest congratulations to David Maimon, who will lead El Al from tomorrow. On behalf of the entire El Al family, I wish him every success.”

Nissim Malki, El Al CFO and Vice President Finance, noted: “I have no doubt that these financial results indicate the implementation and fulfillment of many measures, all of which we repeated and explained over the past years. These include: Resolving the difficult questions surrounding security costs, re-equipping the fleet with modern aircraft and financing the purchases under innovative and excellent terms, impressive growth in internet sales, upgrading our major computer systems, implementing an improved hedging policy, and many more.

“Company equity, which reached $180 million, cash flow from regular activities which in 2013 grew to about $185.3 million, and the increase in pre-tax profits to about $37.5 million are expressions of the above-mentioned business measures. We are benefiting from the first fruits now.

“On a personal level, this is the last financial report that I submit as the Company’s CFO and VP Finance after over 40 years of service with El Al. I would like to thank you personally for the many years of amazing work together; for the cooperation with every and each one of you as full partners of El Al’s. I would like to thank our board of directors for the support and guidance and our CEO Elyezer Shkedy for his friendship and leadership.

“I pass the baton to Mrs. Dganit Palti, and from the bottom of my heart, I wish her every success.”

El Al Israel Airlines today published the financial results that finalize 2013 and the 4th quarter: The following are the highlights:

Revenues from operations for the present year grew by about $2103.00 million compared to $2015.6 million in 2012, a 4% increase. Passenger revenues grew by about 4.9%, largely as a result of increased passenger numbers. Cargo revenues decreased by about 3.3% as a result of the drop in the average ton-kilometer revenue.

Operating costs in 2013 were $1754.2 million, compared to $1701.7 million in 2012 – an increase of about 3.1%, which is a lower ratio than the ratio of Company revenue increases. The increase in operating costs stems largely from the increased cost of salaries and the increase in passenger numbers and flight hours flown. The ratio of operating costs on turnover dropped from about 84.4% in 2012 to about 83.4% in 2013.

Salary and operating costs increased in 2013 compared to 2012, mainly as a result of the strengthening of the average shekel exchange rate against the dollar, and from increased activity.

Security costs – As previously explained by Management at various opportunities, the State’s participation in security costs increased from 70% to 97.5%.

Company expenditure on aviation fuel increased by a modest ratio of 0.7% compared to 2012, although the ratio to turnover dropped from about 34.0% to about 32.9%. Fuel costs dropped slightly, but on the other hand a drop in hedging returns and the increased activity set off the lower prices. Hedging returns in 2013 totaled about $6.1 million, compared to about $22.4 million of returns in 2012.

Gross profit for the present year was about $348.9 million (a ratio of 16.6% on turnover), an increase of about 11.1% compared to about $314.0 million in 2012 (ratio of 15.6% on turnover).

Cost of sales totaled $206.3 million in 2013 compared to $209.1 million in 2012, a drop of about 1%. The total ratio of cost of sales on turnover in 2013 was about 9.8%, compared to about 10.4% on turnover in 2012.

General and administrative expenses totaled about $104.6 million in 2013, compared to about $95.2 million in 2012, an increase of about 10% – largely as a result of increased costs of salaries which rose because of the creeping shekel exchange rate increases vs the dollar. The ratio of salaries to turnover reached about 5%, compared to about 4.7% in 2012.

Profit on operations totaled about $38 million in 2013, a ratio of 1.8% on turnover, compared to an operating profit of about $12.4 million in 2012 (a ratio of 0.6% on turnover).

Net financing costs totaled about $0.8 million in 2013, a major improvement compared to the approximately $37 million in 2012. This was mainly the result of exchange rate income compared to hedging expenses in 2012.

Net profit for 2013 was about $25.4 million compared to a loss of about $18.00 million in 2012.

Cash flow from regular activities increased significantly during the year ended 31st December 2013 and totaled about $185.3 million, an increase of about 137% compared to a cash flow from regular activities of $78.3 million in 2012.

The EBITDA of El Al for 2013 increased to about $141.9 million (about 6.7% on turnover), compared to $121.7 million (about 6% on turnover) in 2012.

Additional data:

As of 31st December 2013 the Company’s cash balance, cash equivalencies and short-term deposits totaled $99.00 million. In 2013 the Company invested around $171.5 million in fixed and other assets, mainly payments for the new 737-900 aircrafts. The Company also repaid loans totaling $86.4 million and obtained net loans of $99.6 million to finance the purchase of the new aircrafts.

Company equity, as of 31st December 2013 totaled $180 million, compared to $136 million as of 31st December 2012.
Results for 4th quarter

Revenues for the 4th quarter of 2013 totaled about $499 million, compared to $463.9 million in the quarter of 2012 – an increase of about 8% over 2012. Net passenger revenues showed an increase of about 8.4%, mostly as a result of increased passenger numbers. Revenues from cargo activities grew by about 6.5%, largely as a result of the amount of cargo flown.

Operating costs totaled about $429.7 million (a ratio of about 86.1% on turnover), compared to $416.6 million in the 4th quarter of 2012 (a ratio of about 89.8% on turnover), an increase of about 3.2%.

Gross profits totaled about $69.3 million 13.9% on turnover), compared to $47.4 million in the 4th quarter of 2012 (10.2% on turnover).
The operating loss for the 4th quarter totaled about $8.3 million, compared to an operating loss of about $29.0 million in the 4th quarter of 2012.

The net loss for the quarter totaled about $3.7 million compared to about $26.1 million loss in the 4th quarter of 2012.