Israel's commercial aviation industry has suffered severe losses as a result of the ongoing Israel-Palestine conflict that escalated immensely in October. Since October, Israeli airlines, such as El Al and Israir, have been unable to forecast their losses truly but have expected negative financial hits this quarter. The results are now public under the enforcement of the Tibi Law, which mandates that all airlines in Israel refund customers for flight cancellations.
When the Knesset's Economic Committee recently convened, it was revealed that $155 million had been refunded to customers due to canceled flights during the ongoing conflict across all airlines in Israel. Of that, $20 million belongs to Israir, and the rest goes to El Al. El Al and Israir called for a delay in the law's enforcement due to the financial losses it caused. There is now the further potential of the law being amended entirely.
It is apparent that the industry is suffering in many other ways. Many airlines have canceled or suspended flights to Tel Aviv Ben-Gurion (TLV), and repatriation and military flights carrying cargo or ammunition have been introduced. Indeed, El Al has transported over 13,000 tons of cargo across passenger flights and on empty passenger aircraft.
Nearly all foreign flights into Tel Aviv have been suspended because of insurance issues. Domestic carriers have been able to continue operating certain flights with insurance backed by the Israeli government.
El Al's Vice President of Commerce and International Affairs, Shlomi Zafrani, noted, "If El Al had not existed, the airport would have almost closed down, [as] we fly almost 80% of those passing through the airport." Israir is seeing similar disruptions, operating only 30% of seats compared to normal. Arkia, the second-largest airline based in Israel behind El Al, also faces problems, having to lay off 200 employees and requesting that the state assist them in hiring essential workers.
El Al has substantially updated their flight schedule, including adding flights to and from North America, Thailand, Paris, and London while suspending flights to other destinations. Booking patterns have changed as well, according to the airline. Many Israeli citizens are making bookings at the last minute instead of far out in advance.
Even with these losses, the industry is expected to recover. El Al's third quarter was quite successful, with the airline reporting $696 million in revenue, a 70% increase in net profit compared to Q3 in 2022, a 60% increase in cash flow compared to Q3 in 2022, and a slight load factor improvement. Such statistics likely indicate the airline can manage fiscal drawbacks this quarter.
Of final note is that the situation caused a major policy change to El Al: they operated flights over Shabbat for the first time in 40+ years, as they transported fighters with Order 8 and Security and Rescue Forces to Bangkok and New York back in mid-October. These flights were offered free of charge for eligible passengers.
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