Market Overview

Record Profits for EL AL

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LOD, Israel--(BUSINESS WIRE)--

EL AL's President & CEO, David Maimon:

"The Company presents record results in all parameters, from revenue growth to major increases in the Company's operating profit and net profit, which in this quarter reached the highest peak of all times. These historic results are the consequence of business moves and actions taken by the Company in the various areas, and all within a competitive and challenging environment.

"In addition to the decline in oil prices, the commercial activity of the Company increased as well; revenues in the third quarter rose to approx. USD 647.3 million, compared to approx. USD 601.2 million in the third quarter of the previous year, reflecting a growth of 8%; we increased the number of passengers, reaching a growth of 12.7%; and load factor rate rose to approx. 86.3%, compared to 82.1% in the third quarter of 2014.

"We are in the midst of the implementation of the Company's long-term renewal strategy focused on the renovation of the long-haul fleet. Only two weeks ago, we completed the acquisition agreement, estimated at a total of approx. USD 1.25 billion, as part of the largest Aircraft Acquisition Program in the history of EL AL.

"The number of EL AL Frequent Flyer Club members continued to grow, reaching over 1.6 million members, particularly since the launch of the FLYCARD and FLYCARD Premium credit cards, which joined over 115 thousand customers over a period of one year.

"The Company's equity dropped to USD 194 million, indicating an increase of approx. 75%, compared to an equity of USD 111 million at the end of 2014.

"I am convinced that EL AL will continue to provide its customers with quality service, the highest levels of comfort, technological and advanced aircraft, and will continue to successfully deal with market conditions and competition.

"I take this opportunity to thank and express my great appreciation to the EL AL employees, both on the ground and in the air."

Dganit Palti, EL AL's CFO, stated:

"The financial statements for the third quarter of 2015 reflect a significant improvement in all operational, cash-flow and financial parameters, including an increase in sales due to a growth in the number of passengers and a substantial decline in expenses as a result of the drop in jet fuel prices.

"The Company recorded a sharp increase in EBITDA to approx. USD 172.6 million and an equity increase of up to USD 197 million. Profit prior to tax, which amounted to USD 126.5 million, was fully expressed by cash flow from operating activities, which reached USD 108 million.

"The excellent financial results and the Company's financial robustness, expressed, inter alia, by high cash flow and deposit balances totaling approx. USD 223 and a particularly low debt/EBITDA ratio, support our long-term Aircraft Acquisition Program, in the framework of which the Company has signed the transaction for the acquisition of the 'Dreamliner' aircraft, which shall lead the Company to the next era of the aviation industry as a leading innovative player."

Results for the Third Quarter of 2015:

  1. Revenues from Operation – amounted to approx. USD 647.3 million, compared to USD 601.2 million in the third quarter of the previous year, reflecting a growth of approx. 7.7%. Revenue from passengers increased by approx. 10.5%, as a result of a significant growth in the number of passengers in the third quarter, in relation to the third quarter of last year (5.4 million segments versus 4.3 million segments last year, showing an increase of approx. 27%), which results both from a growth in the number of Israelis departing abroad (about 28%) and from a growth in the number of tourists entering Israel (about 36%). This is mainly due to Operation Protective Edge, which took place during the summer of 2014, causing a material adverse impact on the traffic at Ben Gurion Airport throughout said period. On the other hand, the trend of the drop in airline ticket prices continued in the current quarter in relation to the third quarter of the previous year, as a result of the decrease in oil prices and the intensifying competition. Additionally, the Company's revenues were affected by exchange rate devaluation of various currencies in which some of the Company's sales transactions are carried out (mainly Euro), in relation to the dollar. In addition, the Company recorded an income of approx. USD 18 million in respect to previous periods, due to an agreement between the Company and the State, providing payment for seats on the Company's flights. In the field of cargo, the Company's revenues from cargo decreased by approx. 15%, mainly as a result of the decrease in the amount of cargo carried by the Company and the impact of exchange rates.
  2. Operational Expenses – operational expenses amounted to approx. USD 438.5 million, compared to USD 498.5 in the third quarter of the previous year, reflecting a decrease of approx. 12% mainly due to a drop in jet fuel expenses totaling approx. USD 68.1 million, compared to the third quarter of the previous year (a drop of approx. 33.2%). This drop is the result of a decline in the effective price of jet fuel (which includes the results of hedging activities taken by the Company, as described below), offset in part by the impact of the 5.1% increase in flight hours, due to which the quantity of consumed jet fuel has risen. Jet fuel expenses as a percentage of turnover declined from approx. 34.1% in the third quarter last year, to approx. 21.1% in the reported quarter.
  3. Gross Profit – the Company's gross profit for the reported quarter totaled approx. USD 208.8 million, thus constituting about 32.3% of the turnover, compared to a gross profit of USD 102.7 million, which constituted approx. 17.1% of the turnover in the third quarter of the previous year. This significant growth in gross profit, in relation to the third quarter of last year, originates from the increase in the Company's revenues and from a sharp decrease in the Company's expenses.
  4. Selling Expenses – Selling expenses remained at similar levels as recorded in the third quarter of the previous year, totaling approx. USD 52.9 million.
  5. General and Administrative Expenses – general and administrative expenses decreased by approx. 11% compared to the third quarter of the previous year, mainly as a result of a decline in salary expenses, which is mostly attributed to the exchange rate. General and administrative expenses as a percentage of turnover decreased from approx. 4.3% in the third quarter of last year to approx. 3.5% in the reported period, among others, due to the fact that most expenses are fixed, and due to the considerable growth in the Company's revenues and scope of operations.
  6. Financing Expenses – net financing expenses amounted in the reported quarter to approx. USD 6.9 million, compared to approx. USD 10.1 million in the third quarter last year. This decrease is mainly attributed to exchange rate differentials.
  7. Profit for the Period – profit prior to tax amounted in the reported quarter to approx. USD 126.5 million and profit after tax amounted to approx. 93 million, constituting about 19.5% of the turnover, compared to profit before tax of approx. USD 14 million and profit after tax of approx. USD 10.1 million in the third quarter of the previous year. This result is due to the growth in the Company's revenues and to the significant decrease in its expenses.

Results for the First Nine Months of 2015:

  1. Revenues from Operation – amounted to approx. USD 1,577.8 million, reflecting a decrease of approx. 0.7% compared to the first nine months of the previous year. Revenue from passengers remained at the same level as in the first nine months of last year. Revenues were affected by a number of trends, which had an impact in the opposite direction. On the one hand, an impact from the increase in the number of passengers passing through Ben Gurion Airport, inter alia, due to the adverse effect of Operation Protective Edge on traffic throughout 2014. Additionally, the Company's revenues for the period include, among others, an income of approx. USD 10 million in respect of previous periods as a result of an agreement between the Company and the State, providing payment for seats on the Company's flights. On the other hand, the Company's revenues were adversely affected by the drop in airline ticket prices, the decrease in oil prices and the intensifying competition. In addition, the Company's revenues were adversely affected by exchange rate devaluation of various currencies in which some of the Company's sales transactions are carried out (mainly Euro), in relation to the dollar. Revenue from cargo transportation decreased by approx. 4.5%, mainly as a result of the drop in prices and the impact of exchange rates.
  2. Operational Expenses – amounted to approx. USD 1,213.8 million, reflecting a decrease of approx. 10.9% compared to the first nine months of the previous year, mainly due to a drop in jet fuel expenses. These expenses decreased in the reported period by approx. 28.2% compared to the first nine months of last year, as result of a decline in the effective price of jet fuel (which includes the results of hedging activities taken by the Company, as described below), offset by the impact of the quantity of jet fuel consumed due to the increase in operations. Jet fuel expenses as a percentage of turnover declined from approx. 33.5% in the first nine months of 2014, to approx. 24.2% in the first nine months of 2015.
  3. Gross Profit – the Company's gross profit for the reported period totaled approx. USD 364 million, thus constituting about 23.1% of the turnover, compared to a gross profit of USD 226.6 million, which constituted approx. 14.3% of the turnover in the first nine months of the previous year. This improvement in gross profit is attributed to the improvement in operational expenses (mainly as a result of the drop in jet fuel prices).
  4. Selling Expenses – a decline in selling expenses of approx. 5.1% was reported in the reported period compared to the first nine months of the previous year, mainly as a result of a decrease in distribution expenses and salary expenses due to the strengthening of the dollar. Selling expenses as a percentage of turnover dropped from approx. 9.6% in the first nine months of the previous year, to approx. 9.2 in the reported period.
  5. General and Administrative Expenses – a decrease of about 12.9% occurred in general and administrative expenses items, mainly as a result of the decline in salary expenses, which is attributed to the strengthening of the dollar. General and administrative expenses as a percentage of turnover decreased to approx. 4.3% in the reported period, from approx. 4.9% in the first nine months of last year.
  6. Financing Expenses – net financing expenses amounted in the reported period to approx. USD 18.5 million, compared to approx. USD 20.3 million in the first nine months of last year. This decrease arises from a decline in the impact of exchange rate differentials in respect of erosion of balance-sheet balances.
  7. Profit for the Period – profit prior to tax amounted in the reported period to approx. USD 128.4 million and profit after tax amounted to approx. 94.3 million, constituting about 6% of the turnover, compared to loss before tax of approx. USD 18.3 million and loss after tax of approx. USD 13.2 million in the first nine months of the previous year. This growth is mostly the result of the decrease in the Company's operation expenses.

Additional Data as of September 30, 2015:

  1. The Current Assets of the Company amounted to approx. USD 444.0 million, reflecting a growth of approx. USD 155.6 million compared to December 31, 2014. This growth resulted from an increase in cash, short-term deposit and customer balances due to a seasonal effect, and from the improvement in the Company's operating results.
  2. The Current Liabilities of the Company amounted to approx. USD 895.3 million. This growth of about USD 87.5 million compared to December 31, 2014 mainly resulted from a seasonal increase in revenue from pre-sale of airline tickets and from an increase in short-term credit, mostly due to the financing of advance payments in respect to aircrafts, offset by a decrease in the Derivative Financial Instruments section.
  3. Working Capital – the Group has a working capital deficit of approx. USD 451.3 million compared to a deficit of approx. USD 519.3 million as of December 31, 2014 (and in relation to a deficit of USD 465.2 million as of September 30, 2014). The Company's current ratio as of September 30, 2015 amounted to approx. 49.6% compared to 35.7% as of December 31, 2014. The improvement in working capital is mainly due to an increase in the Company's liquid balances as a result of the improvement in its operating results and a seasonal effect on current asset items. Said working capital deficit consists of three substantial components which are included in the Company's current asset items and are characterized by current business cycle: revenue from the pre-sale of airline tickets including airport taxes, prepaid revenue from Frequent Flyer Club and liabilities to employees for vacation, which is expected to be paid over several years but classified as a short-term liability in accordance with accounting principles. Such items are affected, inter alia, by the seasonality of the activity and the timing of the holidays. Furthermore, the deficit was affected by short-term loans for the purchase of new 737-900ER aircrafts, to be converted in the coming year into long-term loans, upon receipt of the aircraft. Therefore, a substantial portion of the working capital deficit will not become liquid in the short run.
  4. Non-Current Assets – amounted to approx. USD 1,291.9 million, thus reflecting a decrease of approx. USD 1.3 million compared to December 31, 2014, which consists of a growth in the composition of the Company's assets as a result of receiving the fifth 737-900ER aircraft in the series, whereas on the other hand, said decrease results from current depreciation expenses incurred by the Company.
  5. Non-Current Liabilities - totaled approx. USD 643.7 million, indicating a decrease of approx. USD 18.7 million compared to December 31, 2014. The majority of the proceeds come from loans repayment, offset by a loan received in March 2015 to finance the acquisition of a 737-900 aircraft, and from a growth in deferred taxes as a result of the profit before tax for the reported period.
  6. Equity – amounted to approx. USD 196.9 million. The growth of nearly USD 85.5 million compared to equity as of December 31, 2014, mainly resulted from the net profit for the reported period, which amounted to approx. USD 94.3 million, together with the impact of the Company's hedging instruments on the capital reserve, in a net-of-tax amount of USD approx. 14.6 million and from dividends, declared and paid in the reported period, in the amount of approx. USD 24.7 million.

About EL AL

EL AL Israel Airlines Ltd. (TASE: ELAL) is the national airline of Israel. In 2014, EL AL recorded revenues amounting to nearly USD 2.1 billion. EL AL carries about 2.2 million passengers a year. The Company operates flights to about 34 direct destinations around the world and many other destinations by means of cooperation agreements with other airlines, thus it currently operates around 41 aircraft, 27 of which are owned by the Company.

(www.elal.com)

Details of Conference Call

A recording of the conference call will be available to those interested starting from November 18, 2015, at 14:00, until November 25, 2015, via phone number 972-3-9255927, as well as on the Company's Investor Relations website at: www.elal.com/investor-relations starting from November 22, 2015.

EL AL Israel Airlines Ltd.
Dafna Cohen
Head of Group Business Control and Investor Relations
972-3-9717439
dafnac@elal.co.il
or
Eisenberg-Eliash Ltd.
Amir Eisenberg
CEO
972-3-7538828
amir@pr-ir.co.il









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