El Al Continues to Record Annual Profitability

El Al Israel Airlines continues the profit trend, recording the best annual results in five years. El Al presented an annual profit of 33.1 million dollars as compared with a profit of 6.4 million dollars in 2003 - An increase of 421%.
 
In edition, record Cash Flow from current activities of 175 million dollars, and record turnover of 1.4 billion dollars from passenger and cargo traffic.
 
In 2004 El Al achieved the highest market share in five years of scheduled and charter passengers – 43.3% of the Ben-Gurion Airport market, representing an increase of 15% since 2000. Economizing measures taken by the airline saved some 30 million dollars.
 
In the fourth quarter, El Al presented a loss of 25.9 million dollars as compared with a profit of 9.6 million dollars in the parallel period last year. The loss recorded in the fourth quarter of 2004 was due to an increase in fuel prices that increased that expenditure component to about 24% of total revenue, and to the sharp increases in fuel prices, after hedging, added a total of approximately 29 million dollars to expenses in this quarter. Hedging activities saved an additional 12 million dollars in expenses.
 
In the fourth quarter, $15 million in one-time expenses were recorded (8 million for retirement and 7 million deferred) for allocation to the early retirement plan for employees and deferred compensation. The strengthening of the shekel and euro in relation to the dollar caused a 6 million dollar increase in expenditures.
 
Prof. Israel (Izzy) Borovich, Chairman of the Board, upon presenting the commercial results of the company for 2004, noted that he is proud to head this competitive commercial company which completed the privatization process, was handed over to private ownership in a professional, businesslike and efficient manner, and is today presenting such impressive results.
 
“These impressive achievements are without doubt a result of the unstinting commitment and contribution of the management and the employees”.
 
Haim Romano, El Al's new President said he was grateful for the opportunity and the trust given him to be a part of the effort and success of the national carrier and to lead it to new records and achievements. Romano added that the airline's plans for the future in matters of fleet renewal, destinations, customer service and other issues will be made public in mid-2005 as "El Al 2010."
 
El Al Vice President Finance Nissim Malki today presented the airline's annual financial report for 2004: A growth of 19% in the airline's revenues in 2004 – to a total of approximately 1.4 billion dollars, as compared with revenues of approximately 1.16 billion dollars in 2003
 
Malki added that El Al's increase in revenues for 2004 is attributable to several main factors, including: A growth in the airline's market share of 1.3% (15.0% since 2000), an increase of 15% in the number of passengers and an increase of 17% in revenue from cargo.
 
According to Malki, the increase in the airline's recorded revenue was achieved despite several exogenous factors that affected the commercial results. These include: an increase in fuel costs that raised the airline's expenses by some $67 million after hedging; influence of the revaluation trend (exclusive of deferred compensation costs) on running expenses that decreased the company's profits by approximately five million dollars.
 
Administrative and general expenses declined from 8% to 6% and sales expenditures from 14% to 13%.
 
El Al's ongoing activity in the course of 2004 created a positive cash flow of approximately 175 million dollars and the overall cash balance at the end of the year stood at 153 million dollars.
 
Nissim Malki noted that the financial results indicate a continuing trend of unrelenting activities on the revenue side and rigorous, diligent activity on the expenditure side, including substantial economizing measures.
 
Malki also noted that the financial soundness of the airline and its ability to deal with the challenges facing it are apparent in the positive cash flow of about $175 million that it created in 2004:
 
Malki noted further that the airline's structured policy is to manage and to hedge its risks in terms of interest and exchange rates, and to create cash flow by closely coordinating the timing of cash inflow and outflow.