El Al: loss of $ 1.8 million per day - Finance committee ensures a guarantee For flights to Russia

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by Ifi Reporter Category:Financial Mar 3, 2022

It is symbolic, however, that the financial results of El Al are published a few hours after the State of Israel, with the approval of the three members of the Finance Committee, decided to give it a guarantee. The former national airline needed it because international insurance companies announced they would not be able to insure its flights to Russia due to sanctions over the war in Ukraine.
A few hours after the long-awaited approval, El Al posted another quarter of heavy losses. After a $ 314 million injection by the state from September 2020 - it is clear that the only reason the company has not reached the end of its economic path is state support.

El Al, which is managed by Avigal Sorek, lost $ 110 million in the fourth quarter of 2021 compared to a loss of $ 140 million in the corresponding quarter in 2020. This loss is equivalent to a loss of $ 1.8 million per day, not including Saturdays and holidays.

 


El Al's revenues jumped 137% in the fourth quarter of 2021 compared to the same quarter in 2020 and amounted to $ 265 million. The jump in revenue is due to the fact that the number of passengers, weighted in the flight range, on the flight in the past quarter increased by 509% compared to the corresponding quarter in 2020 and amounted to 2.175 million. The increase would have been sharper had it not been for the effect of the omicron virus starting in November 2021 on the decline in activity.
El Al's gross loss shrank by 73% in the fourth quarter of 2021 compared to the same quarter in 2020 and amounted to $ 18 million. The decrease in gross loss is due to the sharp increase in the company's revenues and occupancy in its aircraft - from 40% in the fourth quarter of 2020 to 70% in the fourth quarter of 2021, which was offset by an increase of $ 105 million in operating expenses. That is, an increase of 59% compared to the same quarter in 2020. The increase in operating expenses was due to an increase of $ 40 million in jet fuel expenses. This is as a result of an 85% jump in the amount of fuel the company consumed due to an increase in activity and due to the jump in the price of jet fuel, which were partially offset by a profit of $ 8.4 million from jet fuel price hedging transactions.
El Al has stopped hedging the jet fuel it consumes in October 2022, a decision that will be reflected in the first quarter of the year with the jump in fuel prices due to the Ukraine war.
Another factor in the increase in operating expenses was a $ 29 million increase in salary expenses, as a result of the fact that in the fourth quarter of 2021 El Al returned all its employees to work - and employed 3,485 employees at the end of December 2021 compared to 1,472 employees at the end of 2020.
El Al's operating loss decreased by 37% in the fourth quarter of 2021 compared to the corresponding quarter in 2020 and amounted to $ 77 million. The decrease in operating loss was due to the decrease in gross loss, which was offset by a 136% jump in the company's selling expenses in the fourth quarter of 2021, compared to the corresponding period in 2020 - to a level of $ 282 million. This is as a result of the increase in commission expenses for travel agents, distribution costs and an increase in advertising and salary expenses against the background of the increase in activity.
Another cause of the operating loss was a $ 12 million profit asked for a record in the fourth quarter of 2021 for $ 210 million the company received from the state - as a down payment for the purchase of airline tickets for the company's security personnel over the next 20 years.
El Al explains that the amount includes an element of a government grant of $ 69 million. The definition of part of the assistance as a government grant stems from the fact that future payments that the state was supposed to pay to El Al, and paid to it in a lump sum as a loan, for the flight tickets to the security guards were discounted at 9.5%. The interest rate differential reflects a government grant given against the implementation of the company's efficiency plan until 2025, and therefore the grant is extended until 2025 and not in the next 20 years.
El Al's current operations generated a $ 11 million cash flow deficit in the fourth quarter of 2021 - compared to a $ 84 million cash flow deficit in the same quarter in 2020.

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