EL AL Israel Airlines Ltd. Announced Today Its Financial Results for the Second Quarter of 2019 and the First Half Year 2019

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• Israel - English

LOD, Israel, Aug. 28, 2019 /PRNewswire/ --

• The Company's (TASE: ELAL) revenues for the quarter amounted to approximately USD 584 million compared to approximately USD 547 million for the second quarter of 2018, indicating an increase of about 7%, mainly due to the growth in the number of passengers and the increase in revenue per passenger, which was attributable, among others, to the timing of Passover that occurred in the second quarter of the year.

• The Company recorded a net profit of USD 83 thousand for the second quarter of 2019, compared to the loss of USD 18 million recorded for the second quarter of 2018; the improvement in results was attributable to the increase in revenues and a decrease in operating expenses, mainly fuel expenses, due to the drop in the fuel price and quantity consumed, which was affected by the operation of the cost-saving 'Dreamliner' aircraft.

• These results though the implementation of IFRS 16 – Leases, which caused an increase of approximately USD 11 million in the Company's financing expenses for the quarter and, in total, caused a decrease of approximately USD 5 million in profit before tax.

• The Company recorded cash flows from operating activities totaling approximately USD 110 million for the quarter, compared to approximately USD 56 million for the second quarter of 2018. The Company's cash and deposit balances as of June 30, 2019 amounted to approximately USD 317 million.

• So far, the Company has successfully received 11 of the 16 787-9  'Dreamliner' aircraft of the Acquisition Program. By the end of this year, the Company is expected to receive three more 'Dreamliner' aircraft, and in the first quarter of 2020 it will received the last two.

• During the second quarter of 2019, the Company launched new routes to San Francisco, Las Vegas and Manchester, additional to the new routes to Tokyo and Chicago, which are expected to operate from March 2020.

• The Company announces today the launch of new routes to Dublin and Dusseldorf, which will operate from summer 2020.

EL AL's CEO, Gonen Usishkin, announced today as follows:

"During the second quarter of 2019, the company recorded a 7% increase in revenues, amounting to USD 584 million, mainly due to impact of Passover, which fell this year in the second quarter. In addition, the Company recorded an improvement in the key operational indicators, and all this alongside the struggle with the challenges and high competition at Ben Gurion Airport.

The Acquisition Program progresses as planned. Thus far, the Company has received 11 new 787-9 and we expect to receive three more by the end of the year, and the last two in the first quarter of 2020, this will complete the Acquisition Program.

We witness a constant growth in our customers' satisfaction from these airplanes. We have removed, as planned, the 676 aircraft fleet and are currently gradually removing the 747 airplanes. At the same time, we have started implementing a program to improve aircraft interiors of existing fleets, which also progresses as scheduled. Accordingly, out aircraft fleet becomes younger and our product is better.

As part of our growth strategy, we enhance existing activities and expand our network of routes by launching routes to new destinations and adding flights to existing ones. In the last quarter, we launched the routes to San Francisco, Las Vegas and Manchester, in addition to the route to Niece, which was launched in the first quarter of 2019. Further to the announcement of launching the routes to Tokyo and Chicago, which are expected to operate from March 2020, the Company announces today the launch of routes to Dublin and Dusseldorf, which are expected to operate from summer 2020.

During the second quarter of 2019, we commenced, as planned, to operate flights to all the Company's destinations in the East and South Africa under a new model, which provides the customer with the possibility of choosing between three different types of flight product packages – Light, Classic and Flex – each customer according to his needs.

I would like to thank our customers for the trust in El Al. We are doing everything possible so that customers will choose us over and over again. Special appreciation is extended to EL AL employees, who share this special effort."

Dganit Palti, EL AL's CFO, announced today as follows:

"The increase in the Company's revenues and the decrease in its expenses improved the profit before tax for the reported quarter by approximately USD 23 million, compared to the second quarter of 2018. All these, despite the implementation of IFRS 16 (Leases), which reduced the improvement in the Company's results for the quarter by about USD 5 million.  The Company recorded a decrease of approximately USD 8.5 million in fuel expenses for the reported quarter due to the drop in jet fuel prices and a decline in the quantity consumed, despite growth in operations as a result of operating the new 787-9 'Dreamliner' aircraft, which are more efficient in fuel consumption.

In the second quarter of 2019, the Company received financing of approximately USD 145 million from Japanese financial institutions, for the purpose of acquiring another 787-9 Dreamliner, which was received by the Company in June. So far, 11 new 787-9 Dreamliners have joined the Company's fleet, of which 4 are owned and 7 are leased".

Financial Results:

For the Second Quarter, April-June 2019:

• The Company's revenues amounted to approximately USD 584 million, indicating an increase of about 7% compared to the second quarter of 2018. Revenues from passengers grew by approximately USD 35.9 million. This growth is attributable both to the increase in passenger revenue per kilometer (RPK) flown by the Company and the increase in yield per passenger-kilometer which, according to the Company's estimates, were also influenced by the timing of Passover, as mentioned above, these impacts were partially offset by the negative impact of exchange rates of currencies used by the Company in  some of its sales transactions, in relation to the dollar. Cargo revenues decreased by about $ 1 million due to a decrease in the amount of cargo and other revenues increased by about $ 2 million mainly from catering services to foreign companies.

• Operating expenses are similar to those reported for the second quarter of 2018, as a result of several trends which, in part, are contradictory:
• An increase of approximately USD 9 million in payroll expenses, primarily as a result of new wage agreements and transition pilots between fleets;
• A decrease of approximately USD 8.5 million in jet fuel expenses;
• An increase in expenses as a result of the increase in passenger revenue per kilometer (RPK) flown by the Company;
• Streamlining of some of the Company's expense items, such as air passage fees and maintenance costs, which were positively affected by the use of the 787-9 Dreamliners and the improvement in the Company's work relations;
• A decrease in operating expenses as a result of the IFRS 16 implementation, which diverted a portion of the Company's lease expenses to the financing item (the majority portion is still charged to expenses for depreciation of leased aircraft usage rights, which are recorded as operating expenses).
• An increase in depreciation expenses (with respect to owned assets) and a reduction in leased asset usage rights (in accordance with IFRS 16), attributable to a growth in the Company's flight equipment with the continued receipt of the 787-9 Dreamliners.

• The Company's jet fuel expenses decreased by approximately USD 8.5 million (reflecting a decrease of about 6.2%) compared to the expenses recorded for the second quarter of 2018, mainly due to the 3% decrease in the quantity of fuel consumed by the Company's aircraft, despite the 4.3% increase in its available seat per kilometer (ASK), primarily attributable to the continued entry of the 787-9 Dreamliners, which are more efficient in fuel consumption, thus leading to the decrease in jet fuel expenses. Moreover, fuel expenses were positively affected by the drop in jet fuel prices. On the other hand, the positive impact of hedging transactions was smaller this quarter.

• Net financing expenses amounted to approximately USD 19.7 million, compared to approximately USD 8.7 million in the second quarter of 2018. This increase was mainly attributable to the Implementation of IFRS 16, which resulted in interest expenses on liabilities for leased assets totaling approximately USD 10.4 and an additional expense of approximately USD 0.6 million for exchange rate differences arising from a balance sheet exposure to selling liabilities denominated in non-dollar currencies (mainly shekel). Additionally, during the period loan interest expenses increased, mostly due to the increase in the amount of loans taken by the Company to finance the 787-9 Dreamliners acquired by it.

• Profit before tax amounted to approximately USD 0.3 million compared to a loss of approximately USD 23.4 million in the second quarter of 2018.

• Net profit amounted to approximately USD 0.1 million compared to a loss of approximately USD 18.2 million in the second quarter of 2018.

For the First Half, January – June 2019:

The Company's revenues amounted to approximately USD 1,012 million increased by approximately USD 5.3 million in the reported period, reflecting an increase of about 0.5% compared to the Company's revenues in the first half of 2018. Revenues from flying passengers increased by approximately USD 15 million, indicating a growth of about 1.7%. This growth was attributable to the increase in passenger revenue per kilometer (RPK) flown by the Company and the increase in yield per passenger-kilometer. The Company's revenues were adversely affected by the negative impact of exchange rates of currencies used by the Company in some of its sales transactions, in relation to the dollar. Cargo revenue in the first half of 2019 decreased by $ 9.2 million (about 11.8%) compared to cargo revenue in the same period last year, primarily as a result of the reduction in volume.

• Operating expenses decreased by approximately USD 22.4 million in the reported period, reflecting a decline of about 2.5% compared to the first half of 2018. The change is attributable to the following reasons:

• A decrease of approximately USD 20.6 million in jet fuel expenses, as elaborated below;

• A decrease resulting from the IFRS 16 implementation, which diverted a portion of the Company's lease expenses to the financing item (the majority portion is still charged to expenses for depreciation of leased aircraft usage rights which are recorded as operating expenses).

• An increase in depreciation expenses (with respect to owned assets) and a reduction in leased asset usage rights (in accordance with IFRS 16) as a result of a growth in the Company's flight equipment with the continued receipt of the 787-9 Dreamliners.

• An increase in payroll expenses, primarily attributable to new wage agreements and transition pilots between fleets, totaling approximately USD 11 million compared to the first half of 2018;

• A decrease in the company's other expenses (excluding fuel, wage and depreciation expenses), mainly due to the streamlining of some of the Company's expense items, such as air passage fees and maintenance costs, which were positively affected by the shift to the 787-9 Dreamliners and the improvement in the Company's work relations

• The Company's jet fuel expenses decreased by approximately USD 20.6 million in the reported period (indicating a decrease of about 8.2%) compared to the Company's expenses in the first half of 2018, mainly as a result of the decrease in the quantity of fuel consumed by the Company's aircraft, despite the 1.6% increase in its available seat per kilometer (ASK), primarily due to the continued entry of the 787-9 Dreamliners, which are more efficient in fuel consumption. Moreover, fuel expenses were positively affected by the drop in jet fuel market prices. Notwithstanding the foregoing, hedging transactions had a smaller positive impact in the reported half year.

• Net financing expenses amounted to approximately USD 37.9 million in the reported period, compared to the USD 12.7 million recorded for the first half of 2018. This increase was mainly attributable to the Implementation of IFRS 16, which resulted in interest expenses on liabilities for leased assets totaling approximately USD 19.7 and an additional expense of approximately USD 1.7 million for exchange rate differences arising from a balance sheet exposure to lease liabilities denominated in non-dollar currencies (mainly shekel). Additionally, during the period loan interest expenses increased, mostly due to the increase in the amount of loans taken by the Company to finance the 787-9 Dreamliners acquired by it.

• Profit before tax amounted to approximately USD 70.7 million compared to a loss of approximately USD 80.3 million in the first half of 2018.

• Net profit amounted to approximately USD 55 million compared to a loss of approximately USD 62.1 million in the first half of 2018.

Operating Results:

For the Second Quarter, April-June 2019:

• Passenger flight legs increased by about 4.7%;
• The Company's market share of passenger traffic at Ben Gurion Airport stood at approximately 25.9% compared to 26.7% in the second quarter of 2018;
• Aircraft Load Factor was 83.4% compared to 82.8% in the second quarter of 2018;
• The Company's weighted average of available seat per kilometer (ASK) increased by about 4.3%, and passenger revenue per kilometer (RPK) flown by the Company increased by about 5%;
• Average revenue per RPK (yield) increased by approximately 3.2%.

For the First Half, January – June 2019:

• Passenger flight legs increased by about 1.2% in the first half of 2019;
• The Company's market share of passenger traffic at Ben Gurion Airport stood at approximately 25.7% in the first half of 2019 compared to 27.2% in the first half of 2018;
• Aircraft Load Factor was 82.3% in the first half of 2019 compared to 83.2% in the first half of 2018;
• The Company's weighted average of available seat per kilometer (ASK) increased by about 1.6% in the first half of 2018, and passenger revenue per kilometer (RPK) flown by the Company increased by about 0.5%;
• Average revenue per RPK (yield) increased by approximately 0.2% in the first half of 2019.

The contents of this notice do not replace reading the Company's financial statements for 2018, the financial statements for the Second quarter of 2019 and immediate reports published from time to time by the Company.

Details of Conference Call

A conference call took place on Wednesday, August 28, 2019, at 12:30 IL. A recording of the conference call will be available to all interested parties from August 28, 2019, at 14:00 IL, until September 4, 2019, via phone number +972-3-9255943, as well as on the Company's Investor Relations website at: https://ir.elal.com.    

For further details:

SOURCE EL AL Israel Airlines Ltd.

Related Links

https://www.elal.com

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