El Al lost $ 136 million in the third quarter of 2021 - Revenues increased by 546% to $ 253 million

The improvement trend in El Al's results was halted in the third quarter of the year following the outbreak of the Delta strain in July and the rise in the price of jet fuel. El Al lost $ 136 million in the third quarter of 2021 compared to a loss of $ 147 million in the corresponding quarter in 2020, which was the low point in the company's operations. The loss in the last quarter was affected by a $ 43 million provision made by EL AL for the impairment of two Boeing 777 aircraft that are about to go out of service and sold.
El Al's revenues increased by 546% in the third quarter of 2021 compared to the corresponding quarter in 2020, and by 14% compared to the second quarter of 2021 and amounted to $ 253 million. El Al's market share at Ben Gurion Airport decreased to 21.6% and the occupancy rate of its aircraft increased to 71.4% in the third quarter of 2021 compared to 67.3% in the second quarter of the year and 23.1% in the corresponding quarter in 2020. The company's revenue increased by 43 % In the number of passengers flying compared to the second quarter of the year.
El Al suffered a gross loss of $ 17 million in the last quarter, compared to a gross loss of $ 20 million in the second quarter of 2021 and a gross loss of $ 61 million in the corresponding quarter in 2020. El Al's gross loss was due to an increase in jet fuel expenses to $ 58 million in the last quarter compared to $ 45 million in the second quarter of 2021 and $ 4 million in the corresponding quarter in 2020.
The increase in jet fuel expenses was due to a 21% increase in the amount of jet fuel consumed in the past quarter compared to the second quarter of 2021 and an increase of 944% compared to the corresponding quarter in 2020. Another reason is a 9% increase in the average price of jet fuel in the third quarter of 2021 compared to the second quarter of 2021 to a level of $ 1.86 per gallon.
The high price of jet fuel will continue to bother EL AL in the near future in light of the apparent change in the company's jet fuel hedging policy on the one hand - and the rise in jet fuel prices to $ 2.15 per gallon (15% higher than the average jet fuel price in the third quarter of 2021).
El Al made an early repayment of the company's jet fuel hedging portfolio of $ 9.1 million, which enriched its coffers in October 2021, and as of the date of publication of the report it has no jet fuel hedging deals. The company seems to have decided that at the current high price level Futures contracts for a certain amount of the quantity you will consume, and in the future will avoid long-term hedging of the price of jet fuel, which caused a heavy loss in 2020. The company is expected to focus on purchasing insurance against a sharp rise in jet fuel price in the short term. From the future price of jet fuel.
Another factor in the gross loss was an increase of NIS 51 million in salary expenses in the past quarter compared to the corresponding quarter in 2020, as a result of the return of employees who were on unpaid leave and a negative effect on exchange rates. The number of employees increased to 3,077 at the end of the third quarter of 2021 compared to 2,873 at the end of the second quarter of the year and compared to 701 employees in the corresponding quarter in 2020.
Itzik Eliav, El Al's CFO, said in a conference call following the publication of the financial reports that the company expects flight prices to rise, and that the company will return to a gross profitability of 35% -40% starting in the middle of 2022.
El Al's operating loss increased by 91% to $ 109 million in the third quarter of 2021 compared to $ 57 million in the second quarter of 2021 and compared to $ 108 million in the corresponding quarter in 2020. The increase in operating loss in the third quarter of 2021 was affected by a provision of $ 43 million for the impairment of two 777 aircraft that the company intends to sell.
In view of the intention to sell, El Al could no longer hide behind their value in use, which is based on assumptions regarding the discounted value of the cash flows generated by the company's aircraft fleet. The company had to acknowledge the fact that the market price of the aircraft is significantly lower than their balance sheet value.
The increase in EL AL's operating loss compared to the second quarter of 2021 was also due to the fact that in the second quarter of the year another income of $ 10 million was recorded as a result of recording profit from the sale of engines and adjusting rents from renters. However, after deducting non-recurring income and expenses, the current operating loss decreased to $ 66 million in the third quarter of 2021 compared to $ 68 million in the second quarter of the year.
EL AL's current operations generated a $ 86 million cash flow deficit in the third quarter of 2021, compared to a cash flow deficit of $ 34 million in the same period in 2020. El Al attributes $ 56 million from the increase in the cash flow deficit to a payment of $ 56 million to past debts to customers and suppliers, thus completing a past debt payment of $ 340 million.
Eligal Sorek, CEO of El Al, said that pre-sales revenues from October 2021 were $ 122 million, reflecting 64% of pre-sales revenues in October 2019 - compared to $ 73 million in pre-sales in September 2021, which were 38% of the same level in 2019
Sorek added that the company intends to raise $ 100 million in a debt issue against the frequent flyer club and the Fly Card credit card, as an interim move to bring in a strategic partner, although the company will retain control of the club. The company plans to develop growth engines, among other things, by creating aviation alliances. The company is trying to formulate a residual code agreement with one of the three American airlines. The company will try to increase its market share in North America, and develop tourism and land services activities. Sorek said the company does not intend to close down its Sun Dor subsidiary, which is active in short-term goals.