May 29, 2018 / 10:33 AM / 5 months ago

El Al Airlines first-quarter loss widens as market share falls

JERUSALEM, May 29 (Reuters) - El Al Israel Airlines on Tuesday reported a bigger loss in the first quarter, reflecting the impact of higher jet fuel and salary costs and a further deterioration in market share.

Israel's flag carrier has met with stiff competition from rivals including Turkish Airlines, Aeroflot, easyJet and WizzAir, which offer lower fares on routes to Israel even though some flights require a stopover.

During the quarter, El Al's market share at Tel Aviv's Ben-Gurion airport slipped to 27.5 percent from 32.3 percent a year earlier, but the airline remained the market leader.

El Al's passenger numbers rose 2.6 percent versus 20.7 percent for all airlines, according to data from the Israel Airports Authority.

El Al said its passenger load factor, which measures, capacity utilisation, was 83.8 percent, compared with 83.6 percent last year.

Chief Executive Gonen Usishkin said the first-quarter results reflected "the many challenges stemming from the open skies (with Europe) and the fierce and increasing competition from foreign airlines -- especially low cost carriers."

He said due to the increasing competition, El Al would accelerate its efficiency plan, including removing older Boeing 767 aircraft from service this year rather than in 2020 and changing its commission payments to travel agents.

It is also postponing the launch of a non-stop route to San Francisco until the second quarter of 2019 from later this year.

"The plan ... examines all channels of operation and areas of activity and aims to increase revenue and significantly reduce expenses to create a clear path of an improvement of results over many years," Usishkin said.

The company reported a $44 million loss in the first three months of 2018, compared with a $30 million loss a year earlier, partly weighed down by a weaker dollar against the shekel.

Revenue rose 11 percent to $464 million, although expenses rose 15 percent, largely because of a 25 percent increase in jet fuel costs and higher salary expenses as the minimum wage increased.

El Al is banking on a more than $1 billon overhaul of its long-range fleet to win back customers while also revamping its short-haul fare structure.

It has received the first four of 16 Boeing 787 aircraft that will be delivered by 2020 and it expects three more by the end of October.

In March, El Al petitioned Israel's Supreme Court to restrict any new flights to the country via Saudi airspace until it can also use a shorter route.

Saudi Arabia does not recognise Israel and El Al must take a more circuitous route to avoid Saudi Arabia, which it has said adds two hours to flight times and increases costs.

The petition came a week after Saudi Arabia opened its airspace for the first time to a commercial flight to Israel.

Reporting by Steven Scheer. Editing by Jane Merriman

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