El Al Israel Airlines (TASE: ELAL) announced today that revenues in the second quarter of 2017 amounted to approx. USD 541 million, compared to approx. USD 537 million in the second quarter of the previous year, an increase of about 0.6%;
Gross profit in the second quarter of 2017 amounted to approx. USD 107 million, compared to approx. USD 124 million in the second quarter of the previous year, a decline of about 13%;
Operating profit in the second quarter of 2017 amounted to approx. USD 27 million, compared to approx. USD 51 million in the second quarter of the previous year, a decline of about 47%;
Net profit in the second quarter of 2017 amounted to approx. USD 16.4 million, compared to a profit of approx. USD 35 million in the second quarter of 2016, a decline of about 53%;
The number of flight segments in the second quarter of 2017 increased by approx. 2.4% compared to the second quarter of the previous year; the Company's market share of passenger traffic at Ben Gurion Airport in the second quarter of the year was approx. 29.5%, compared to 34.2% in the second quarter of 2016;
Passenger Load Factor in the second quarter of 2017 stood at approx. 84.3%, compared to 83.1% in the second quarter of the previous year; the Company's ASK (Available Seat Kilometer) declined by about 3% and RPK (Revenue Passenger Kilometer) decreased by about 1%;
Average total income per RPK (Yield) increased by about 0.7%;
Cash flow from operating activities in the second quarter of 2017 amounted to approx. USD 101 million compared to approx. USD 107 million in the second quarter of last year;
EBITDA amounted to approx. USD 70 million, compared to approx. USD 96 million in the second quarter of last year;
The Company's cash and deposits balances as of June 30, 2017 totaled approx. USD 276 million;
The Company's equity as of June 30, 2017 totaled approx. USD 247 million;
The Company's revenues in the first six months of 2017 amounted to approx. USD 959 million, compared to approx. USD 934 million in the first six months of the previous year, indicating a growth of about 2.6%;
Gross profit in the first six months of the year amounted to approx. USD 148 million, compared to approx. USD 158 million in the first six months of the previous year, reflecting a decline of about 6.4%;
Net Loss in the first six months of 2017 amounted to approx. USD 13.6 million, compared to a net profit of approx. USD 13.6 million in the first six months of 2016;
David Maimon, EL AL's CEO:
"In the second quarter of 2017, EL AL had to cope with the huge growth in competition at Ben Gurion Airport. Notwithstanding, revenues increased due to an increase in passenger segments. Load factor increased, cash flow is strong and the Company maintain its financial strength.
We are delighted to inform that the first Dreamliner, a Boeing 787-9 aircraft, will arrive this month and begin operating in the next few weeks, this will lead the Company to a new era. This plane is the first out of 16 to reach by the end of 2020.
We submitted a request to the Antitrust Commissioner to approve the acquisition, through its subsidiary Sun d'Or, of Israir Aviation and Tourism from I.D.B Tourism. The transaction is an important element in the implementation of EL AL's long-term strategy to enhance and diversify the basket of services offered by the Company, allowing it to increase the entire Group revenues and accelerate the Company's growth while increasing its volume of operations.
The Fly Card credit card continues to serve as a major growth engine, currently with about 238 thousand holders.
The Company will launch in November a direct route to Miami, which is an important strategic step in the continued expansion of EL AL's route network in North America.
We are committed to continue to provide our customers with services and products at the highest level and focus on our continued efforts to deal with the challenging market conditions".
Dganit Palti, El Al's CFO, stated:
"Also this quarter, the Company recorded an increase in revenues, despite the challenging business environment characterized by a significant increase in competition at Ben Gurion Airport. Alongside this , an increase in jet fuel expenses was recorded due to the increase in oil price, and an increase in payroll expenses, mainly due to the new wage agreements and the strengthening of the shekel against the dollar
In the second quarter, the Company continued to generate high cash flows from operations of over USD 100 million and present high liquidity expressed by cash balances of approx. USD 276 million along with equity of approx. USD 247 million.
Furthermore, the Company paid during the quarter advances totaling approx. USD 24 million for the Dreamliner aircrafts it has acquired, which are expected to join the Company's fleet during 2018.
The Company's cash reserves and its high cash flows from operating activities constitute a solid basis for promoting its investments as part of the Company's long-term strategic plan."
Profit and loss results for the three months ended June 30, 2017
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Operating revenues – operating revenues amounted to approx. USD 541 million, reflecting an increase of about 3.4% in the reported period compared to the second quarter of 2016, with an increase of about 1.1% in passenger revenues. The increase in the Company's revenues appears despite the decline in passenger revenue kilometer (RPK) flown by the Company (as a result of a different flight mix operated by the Company), mainly due to an increase in passenger yield per kilometer. Cargo revenues decreased about 2.5%, mostly as a result of a decline in revenue ton kilometer (RTK) flown by the Company. -
Operating expenses –operating expenses amounted to approx. USD 434 million, reflecting an increase of approx. USD 19.9 million in the reported period (about 4.8%) compared to the second quarter of 2016. Operating expenses were mainly affected by an increase of approx. USD 12 million in the Company's payroll expenses. The increase in payroll expenses resulted from several factors, of which the most important are: the weakening of the dollar against the shekel, an increase in the salaries of employees following wage increases under the Company's wage agreements, inter alia, agreements executed with the Pilot Union in December 2016 and February 2017, as well as due to an updated provision in respect of procedures related to withholding salary tax assessment, as described in Note 7.D. to the condensed financial statements. The Company's jet fuel expenses also increased, as specified below. The increase in expenses was offset by a decline in the ad hoc lease expenses of passenger and cargo aircrafts, compared to the second quarter of 2016. -
Jet Fuel Expenses –jet fuel expenses increased by approx. USD 6.2 million (about 6.2%) compared to the second quarter of 2016, as a result of an increase in jet fuel prices. This impact was partially offset by the change in the results of jet fuel hedging transactions and the decline in flight hours.
The following table reflects the impact of jet fuel expenses on the Company's results, including the impact of hedging transactions (in USD million):
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Selling Expenses – selling expenses totaled at approx. USD 54.6 million, an increase of about 7.2%%, mainly as a result of an increase in the Company's advertising expenses arising from initiating new campaigns for the launch of a new destination and the arrival of the 787 aircrafts, as well as an increase in payroll expenses, mainly due to the change in the dollar exchange rate, as explained above. -
Financing Expenses - net financing expenses amounted to approx. USD 4.6 million compared to approx. USD 5.8 million in the second quarter of 2016, mostly as a result of financing income recorded for the impact of the shekel strengthening against the dollar in the reported quarter on current assets balances on the Company's balance sheet (it should be noted that revaluation of balance-sheet shekel balances, most of which are liabilities, related to employee benefits recognized as an expense, are presented in the payroll expenses item and constitute part of the exchange rate impact on those expenses). -
Profit before tax – profit before tax amounted to approx. USD 21.8 million, compared to a profit before tax of approx. USD 47.0 million in the second quarter of the previous year, mainly as a result of the aforesaid increase in operating expenses. -
Profit for the Period –totaled approx. USD 16.4 million, constituting about 3% of the turnover, compared to a profit after tax of approx. USD 35.0 million in the second quarter of 2016, constituted about 6.5% of the turnover. -
Cash Flows from Operating Activities – cash flows from operating activities amounted to approx. USD 101.2 million, compared to positive cash flows from operating activities of approx. USD 107.2 million in the second quarter of 2016. The decrease in cash flow was mainly due to a drop in the profit for the period, offset by the impact of changes in the assets and liabilities items compared to the second quarter of 2016. Additionally, cash flows from operating expenses in the reported quarter were affected by the payment of partial bonuses to employees and executives, whereas in the second quarter of last year these bonuses were paid in full.
Profit and loss results for the six months ended June 30, 2017
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Operating revenues – operating revenues amounted to approx. USD 959 million, reflecting an increase of approx. USD 25 million, about 2.6% compared to the first half of 2016, with an increase of about 3.9% in passenger revenues and a decrease of about 9.8% in cargo revenues. The increase in the Company's revenues in the reported half year was mainly due to the increase in passenger revenues, as a result of an increase in passenger revenue per kilometer (RPK) flown by the Company and in passenger yield per kilometer. The decline in cargo revenues in the reported half year was the result of a decline in revenue ton kilometer (RTK) and yield per ton-kilometer. -
Operating expenses – operating expenses amounted to approx. USD 810 million, reflecting an increase of approx. USD 34.6 million (about 4.5%) compared to the first half of 2016. The increase in operating expenses in the reported half year was mainly due to an increase in the Company's payroll expenses arising from the weakening of the dollar against the shekel (as explained above in the second quarter results) and due to the 2016 bonus that was approved in April 2017, as well as an increase in both jet fuel expenses and depreciation expenses (among others, in view of the exit plan from the 747 and 767 aircraft servicing), which were partially offset by a decline in the ad hoc lease expenses of passenger and cargo aircrafts, compared to the first half of 2016. -
Financing Expenses - net financing expenses in the reported half year amounted to approx. USD 9.6 million compared to approx. USD 10.7 million in the first half of 2016, mostly as a result of income from exchange rate differentials due to the shekel strengthening against the dollar, compared to income from loan repayment recognized in the first half of 2016. -
Loss for the Period – in the reported half year, loss before tax amounted to approx. USD 17.0 million and loss after tax amounted to approx. USD 13.6 million, constituting about 1.4% of the turnover, compared to a profit before tax of approx. USD 13.4 million in the first half of 2016 and profit after tax of approx. USD 13.6 million, constituted about 1.5% of the turnover. The difference resulted mainly from an increase in the Company's operating expenses.
Balance Sheet Data as of June 30, 2017:
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Current Assets - amounted to approx. USD 548.4 million, reflecting a growth of approx. USD 110.2 million compared to December 31, 2016. This growth resulted mostly from an increase in cash and short-term deposits balances, compared to such balances at the end of 2016, and from a seasonal increase in the receivables item, which was partially offset by a decrease in the derivatives financial instruments item. -
Current Liabilities - amounted to approx. USD 965.4 million, reflecting a growth of approx. USD 162.2 million compared to December 31, 2016. This growth mainly arises from a seasonal increase in the unearned revenues from sale of airline tickets' item and in trade payables and other payables compared to December 31, 2016. It shall be further noted that the Company's short-term loans were affected by an increase in loans taken to finance advances for aircrafts, whose repayment is expected to be financed by long-term loans to be obtained upon arrival of the aircrafts. This impact was offset as a result of a refinancing agreement entered into with a local bank, as described in Note 5.B.(2) to the condensed financial statements. -
Working Capital – the Company has a working capital deficit of approx. USD 417.1 million as of June 30, 2017, compared to a deficit of approx. USD 365.1 dollar as of December 31, 2016. It shall be noted that a substantial part of the working capital deficit does not reflect short-term cash flows, as explained below. The Company's current ratio as of June 30, 2017 increased to approx. 56.8%, compared to 54.6% as of December 31, 2016. The working capital deficit as of June 30, 2017 consists of two substantial components which are included in the Company's current liabilities items and are characterized by current business cycle; however, the Company is not required to use cash-flow sources in the short term in order to repay these components: prepaid revenue from the sale of airline tickets and from the Frequent Flyer Club, to be settled by providing future flight services, and an employee leave liability payable upon retirement but classified as a short-term liability in accordance with accounting principles. Furthermore, current liabilities include loans taken to finance advance payments for the 787 aircrafts, whose source of repayment is based on long-term financing which will be provided upon receipt of these aircrafts. As of June 30, 2017, the amount attributable to these liabilities, out of the total current liabilities, stands at approx. USD 57 million. -
Non-Current Assets – amounted to approx. USD 1,320.9 million, indicating an increase of approx. USD 39.1 million compared to December 31, 2016, mainly as a result of advance payments made for the 787 Boeing aircrafts acquisition, less current depreciation. -
Non-Current Liabilities - totaled approx. USD 657.3 million, indicating an increase of approx. USD 24.5 million compared to December 31, 2016, mostly as a result of an increase in bank loans (among others, a loan received during the reported quarter for the purpose of financing advances). -
Equity – amounted to approx. USD 246.5 million. The decline of approx. USD 37.5 million, compared to equity as of December 31, 2016, mainly resulted from the loss for the period and a payment of a dividend of about USD 9.9 million, as well as the impact of the Company's hedging instruments on the equity funds, in a negative, net-of-tax amount of approx. USD 18.0 million, partially offset by a positive impact on the equity in respect of re-measurement of defined benefit plans (actuary) and conversion differentials of approx. USD 4.0 million.