El Al Israel Airlines is in “serious” talks with planemaker Airbus to buy as many as 30 A321neo jets, El Al’s CEO said on Thursday, in what would be a historic change of supplier as it looks to replace its short-haul fleet.
Israel’s flag carrier is also in talks with traditional supplier Boeing to buy 737 MAX aircraft, Dina Ben Tal Ganancia told Reuters on the sidelines of a conference after El Al issued quarterly results and as it celebrated 20 years of being traded on the Tel Aviv Stock Exchange after privatization.
A decision likely would be made early in 2024, Ben Tal Ganancia said. At list prices, the investment would be near $4 billion but El Al would likely pay far less after discounts.
Since its inception in 1948, El Al has maintained an all-Boeing fleet, owing to Israel’s close ties with chief ally the United States, so a break would be a significant policy change.
“It is serious,” Ben Tal Ganancia said of the talks with Europe’s Airbus. “We’re negotiating with both suppliers. They are coming back and forth to Israel to show us their business cases and we are examining them.”
: An Israel El Al airlines plane is seen after its landing following its inaugural flight between Tel Aviv and Nice at Nice international airport, France, April 4, 2019. (credit: REUTERS/ERIC GAILLARD/FILE PHOTO)Changing from Boeing to Airbus
It is normal for airlines to seek quotes from both major planemakers and the change of supplier is not guaranteed. Boeing is certain to try to defend its longstanding position at the carrier.
But the A321neo, with more seats and longer range, has been steadily winning market share in the lucrative top end of the single-aisle market.
As part of a new five-year strategic plan unveiled on Thursday, El Al is seeking to boost its fleet from a current 46 planes to 59 by 2028.
For short-haul flights, it plans to replace its fleet of 24 Boeing 737-800 – which have an average age of 19 years – and 737-900 planes, while possibly buying another six.
The purchase would be done in a number of tranches, said Ben Tal Ganancia.
In recent years, El Al has been upgrading its longer haul fleet. It currently has 16 Boeing 787 Dreamliner aircraft, with plans to reach 22 as it expands its route network further to Asia, Australia and North America. It is also retrofitting four Boeing 777 aircraft for longer routes.
This year it launched flights to Istanbul, Dublin, and Tokyo and expects to add Mumbai and Fort Lauderdale later in 2023.
El Al is targeting $3.5 billion in annual revenue and 7.7 million passengers in 2028 for a 24% market share at Ben Gurion International Airport near Tel Aviv. It expects revenue of $2.4 billion in 2023, up from $2.0 billion last year.
In the second quarter, El Al earned a net $59 million versus a net profit of $100 million a year earlier. Excluding a large one-time gain from the sale of its frequent flier club, El Al recorded a $15 million net loss in the second quarter of 2022.
Its bottom line this year was helped by a 29% decline in fuel costs, though salary expenses rose 37.5% in the quarter.
Revenue grew 22% to $630 million, above $584 million in the second quarter of 2019 before the pandemic hit travel.
Its load factor – a measure of seats filled – reached 87%, from 82% a year earlier, while El Al maintained a 23% market share at Ben Gurion International Airport.
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