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EL AL doubles its cooperation with Boeing and places the largest single order in the airline’s history.
Gordon Smith
Israel’s national carrier confirmed a major new contract with Boeing on Thursday. EL AL Israel Airlines will purchase up to 31 Boeing 737 Max aircraft as part of a major fleet renewal.
The agreement is remarkable for both sides. Boeing was able to gain a new customer for its crisis-ridden 737 Max program, while EL AL signed the largest single order in its 76-year history.
The contract provides for 20 737 Max aircraft for the company’s Tel Aviv-based fleet, with options for up to 11 more. Even if the additional jets are not realized, the deal is worth around $2 billion at list price. Deliveries are expected from 2027.
EL AL already operates an all-Boeing fleet of around 44 aircraft. Of these, 24 are the previous generation 737-800 and -900. The remaining 20 aircraft are larger Dreamliners of the 777 and 787 types, which are typically used on long-haul routes.
EL AL’s strength in war
The developments come at a highly sensitive time for Israel and the entire region. At the end of last month, major US airlines were among those to suspend flights to and from Tel Aviv in light of the escalating tensions.
Most international airlines suspended all flights to the city following the start of the Israel-Gaza war in early October 2023. As the conflict is still ongoing, not all airlines have resumed operations. Those that have resumed often experience last-minute cancellations and temporary route closures.
This has resulted in EL AL being the only – if not the most reliable – option for many nonstop routes. As a result, Israel’s national carrier is enjoying some of its highest profit margins ever. In the first quarter of 2024 – traditionally a weak quarter for the Israeli market due to seasonal factors – EL AL reported an operating margin of an outstanding 16%.
Only 3.5 million passengers flew into the country during the quarter, compared to the 5.6 million forecast. However, EL AL itself carried 1.4 million of these 3.5 million passengers, compared to only 1.1 million expected. Air cargo traffic was also good.
EL AL expects its performance to be even better in the second quarter. The airline has not yet released its financial figures for the second quarter, which runs from April to June.
EL AL strengthens partnership with Boeing
Thursday’s news about the 737 Max follows a more modest deal between the airline and the plane maker earlier this year.
In March, EL AL agreed terms for three more 787-9s with options for up to six more. Boeing’s delivery schedule suggests the airline will receive one of the new Dreamliners before the end of 2024, with two more to follow through aircraft lessors.
Reacting to the 737 Max agreement, EL AL CEO Dina Ben-Tal Ganancia said: “EL AL plays a central role in ensuring open skies for Israel. The implementation of our strategic plan – which aims to expand the fleet, increase the value proposition for customers and increase capacity and seats – will ensure a strong and growing company for many years to come.”
The deal followed a stock exchange announcement in June that EL AL had entered into exclusive negotiations with Boeing and aircraft lessors. European aircraft manufacturer Airbus had also bid for the project.
Development of the stock index for the airline sector since the beginning of the year
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