EL AL STRATEGY
El Al revamps its tariff structure
PARIS, France (eTN) - Israel national carrier, El Al, announced a drastic revamp of all its fares around the world as the airline faces increased competition from low-fare airlines and suffered from uncertainties generated by political turmoil in the Middle East. “We thought there was a need for a change in our fares, as our clients wanted a more flexible and simpler structure,” was said at a press conference in Paris by El Al CEO and President Elyezer Shkedy.
Starting from October, in time for the winter season 2011/2012, El Al will propose only 2 fare seasons: a high-peak and off-peak period. The high-peak period is now applicable only during 2 or 3 weeks per year during the summer and the Jewish Easter time. Booking classes have also been simplified and harmonized in all markets. There are now 12 levels in economy class and 5 levels in business class. All these fares are sold on a one-way basis and can be consequently combined. “We will offer then fares to a level significantly lower than our current price structure,” promised El Al's President and CEO. The airline will also create additional fares for juniors, seniors, and families, valid all-year round.
Like many other carriers, El Al is currently bracing for difficult times. After recording an annual net profit in 2010 of US$57.1 million, financial operations are back into the red with a loss of US$52.6 million during the first half-year of 2011. Although the rise in oil prices can be blamed for the airline's weak performance, El Al is particularly at a disadvantage due to some incompressible expenses.
“We proudly carry the symbol of Israel on our planes, and as a national carrier, we have a special duty to honor our country. We fully respect, for example, Sabbath every Saturday. However, stopping to fly for a day and a half is giving an advantage to our competitors. We also serve exclusively kosher-certified meals on board to be sure that our travelers will feel at home with us. All these details add to costs,” told Mr. Shkedy.
Safety remains one of the airline’s largest expense. "We spend between US$40 and 50 million each year for safety [the equivalent of 2% to 2.5% of total turnover of 2010]. For an airline such as Lufthansa, it would represent the equivalent of US$850 million per year. But we can assure that we are probably the safest airline in the world,” stressed the airline’s President and CEO.
El Al is also burdened by its political situation, which remains a major handicap to its development. “We cannot be part of an international alliance due to the presence of airlines from Muslim countries. I have anyway a team specially dedicated to work out ways to be in the long-term part of an alliance. Due probably to my past in the military, I will not give up,” said Elyezer Shkedy.
The political issue intrudes also into the creation of an efficient international hub at Tel Aviv airport, El Al's main base. “We are ideally placed on routes between West and East. However, we cannot fly over Arabic countries eastwards, which make our routes to the Far East longer than for our competition,” added Mr. Shkedy, who still believes that solutions might emerge someday.