Israir announced it'st third Quarter: Revenues grew by 209% and amounted to 124 million dollars

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by Ifi Reporter Category:Financial Nov 29, 2022

Israir reported strong growth in revenues in the third quarter - which helped it to present record results, despite the sharp increase in the price of fuel. The airline achieved the results by implementing a pricing engine based on artificial intelligence, which allowed it to maximize the value of each passenger.
Israir, which is managed by Uri Sirkis, earned $15 million in the third quarter of 2022. This is compared to a loss of $10 million in the corresponding quarter in 2021 - which was still affected by the Corona epidemic. Israir's revenues grew by 209% in the last quarter compared to the corresponding quarter in 2021, and amounted to 124 million dollars. The revenues in this quarter were only $4 million lower than the revenues in the corresponding quarter in 2019, before the corona epidemic broke out.
Israir's gross profit grew by 908% in the third quarter compared to its counterpart last year, and by 9% compared to the third quarter of 2019. It amounted to $23 million, which is 18.7% of turnover - compared to 5.7% of turnover in the corresponding quarter last year and 12 % of the equivalent in 2019. The increase in profit and gross profitability stands out against the background of the jump in the price of jet fuel - which increased the cost of fuel consumed by the company by $15 million compared to the corresponding quarter last year and by $11 million in the corresponding quarter in 2021.
Israir's ability to absorb the sharp increase in the price of fuel was due, among other things, to the fact that due to its different business model - which is based on the sale of holiday packages in contrast to airlines such as El Al which mainly sells flights - the cost of fuel is only 15.6% of the company's cost of sales. This is in contrast to airlines, where the fuel component is 25-30% of the selling price. Another significant factor in the sharp increase in profit and gross profitability was the implementation of yield management technology - that is, the average revenue per passenger per kilometer that the company flies using the Quick-Lizard software system.
Israir states in a presentation published at the same time as the report that the Quick-Lizard system increased the net return from a one-way flight by $25, which is actually an increase of $50 in return for the product the company sells - a vacation package that includes a round-trip flight. Because Israir sold 320,000 flight segments In the past quarter, Quick-Lizard software increased the company's revenue by $8.2 million in the third quarter.
The software analyzes information from a variety of sources, including hotels and flights from competing companies, using an artificial intelligence-based pricing engine. The recommendations that Quick-Lizard produces allow Isherair to optimize in real time the pricing of each of the products it sells - flights, or flights combined with ground services such as hotels - and to react in real time to market performance, for example an apparent shortage of hotel rooms or changes in the availability of flights to a specific destination in a specific time window . The software makes it possible to define a specific action rule for each product, for example, determine that a package that includes a flight to Batumi and accommodation in a 4-star hotel will be $50 cheaper than a corresponding package of a flight and hotel of the same level in Bucharest.
In the last quarter, Israir presented an operating profit of 12 million dollars, compared to an operating loss of 7.5 million dollars in the corresponding quarter last year and an operating profit of 12.9 million in the corresponding quarter in 2019. The transition to operating profit was aided by the sharp increase in wind and gross profitability and the deep streamlining process that Israir went through during the Corona period - and allowed it to expand the scope of operations in January-September 2022 to 2,400 flights, compared to only 1,900 in the corresponding period in 2019. This, despite a 30% reduction in the workforce - 398 employees in 2022, compared to 557 employees in the corresponding period in 2019. The operating profit in the last quarter could have been even higher, if Israir had not made a provision of one million dollars for claims it might receive against the background of problems with the accuracy of flight times and loss of baggage.
Israir's current operations generated a cash flow surplus of $6 million in the third quarter, compared to a cash flow deficit of $7 million in the corresponding quarter in 2021. The cash flow surplus resulting from the high profitability in the past quarter will help Isherair to finance from its sources the purchase of the Czech company Smartwings, which owns a fleet of 40 aircraft leased on a wet lease (aircraft + aircrew). The consideration for the purchase is expected to be a payment of 8 million euros in cash, a repayment of 12 million euros of owner loans and the assumption of the balance of owner loans in favor of a future repayment of 24 million euros. The future of the deal will be decided within a month through a tender.

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