Fuel prices put El Al expansion plans on hold

Enjoying healthy revenue streams but buffeted by sky-high oil prices, El Al Israel Airlines has increased fuel surcharges on airfares, put U.S. gateway expansion plans on hold and stopped flying to Brazil.

According to Danny Saadon, vice president of El Al in North and Central America, “The big news, unfortunately, is the same you’d hear from any airline.

“Our top line is doing very well, with revenue much higher than in previous years, but unfortunately the bottom line is not improving because of these fuel prices, and that’s a struggle,” he said. “Oil prices are now going up and staying up, which is almost unsustainable.”

In response, El Al in early March upped its existing fuel surcharge by $20, for a total of $260 each way.

The adverse cost conditions have forced the carrier to take a hard look at the profitability of all its routes. The first casualty, three months ago, was El Al’s nonstop service between Tel Aviv and Sao Paulo, Brazil.

“We’re analyzing all the routes we fly to see how we can improve, and if we can’t, we’re looking at closing certain of them or reducing frequencies,” said Saadon.

Although the fuel situation has also led to El Al shelving its plans to add a fourth U.S. gateway at either Chicago or Miami, the carrier is increasing frequencies on the Tel Aviv-Los Angeles route, to six weekly by midsummer.

“That’s an addition we never had before,” said Saadon, noting that El Al usually connects the cities three times a week in winter and five times a week in summer. “We looked at the capacity and load factors on the L.A. route last year, and it looked good.”

On such good routes, he added — including London and Paris as well as the U.S. — El Al is maintaining and even increasing frequencies.

Regarding Chicago and Miami, Saadon said that El Al “won’t make any decisions as long as fuel prices remain high. But once the situation stabilizes, those two destinations are still our frontrunners.”

In terms of cooperation with other airlines, El Al continues its longtime quest to join a global airline alliance. The carrier has negotiated with Star Alliance, Oneworld and SkyTeam, but to no avail.

“Unfortunately we did not reach any agreement, [so] I don’t see it happening in the near future,” Saadon said. “But I hope it does. It’s important to be in an airline alliance. It makes life easier, not only for the airline but for agents and passengers.”

Follow Kenneth Kiesnoski on Twitter @kktravelweekly. 
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