Looking For a Profitable Airline? How About El Al
Written by: Aaron Katsman | March 27, 2008
Aaron Katsman
www.IsraelNewsletter.com
With airlines around the world struggling with high fuel costs, labor disputes and continued client complaints about late arrivals, who would have thought that El Al, the Israeli airline would actually be turning a profit?
Airline stocks like Continental (CAL), JetBlue (JBLU) have gotten pounded of late. El Al, which unfortunately only trades on the Tel Aviv Stock Exchange has held steady over the course of the year.
El Al reported earnings of of $40.7 million dollars for ‘07, a huge leap from the $33.9 million loss in ‘06. Revenues also jumped 16% in ‘07 to $1.93 billion.
How can the carrier be doing so well in such a lousy environment? The company was privatized a few years ago and the efficiencies that have been created by getting the government out of running the airline are starting to be realized. Also El Al has some very profitable routes, and they have been running at near full capacity on them. For example if you are thinking of coming to Israel from New York, it’s virtually impossible to get a ticket and if you can get one, you are going to pay a ton of money for it.
But if you want to know the real reason, it’s because they have VOD( video on demand) service on their new airplanes. This VOD is so cool. You can pick from a host of movies, TV shows, music, even play chess, on demand, whenever you want. All you have to do is touch the screen.
Disclosure: Author holds no position in any stock mentioned as of 3/27/08.
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Aaron Katsman is Managing Editor of the Israel Opportunity Investor newsletter. He is lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.
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