EL AL Israel Airlines Ltd. Presented Today its Financial Results for the Second Quarter of 2016 and the First Half of 2016

LOD, Israel, Aug 17, 2016 /PRNewswire/ --

The Company's operating revenues in the second quarter of 2016 amounted to approx. USD 537 million, compared to approx. USD 511 million in the second quarter of the previous year, an increase of 5%.

Gross profit for the second quarter of 2016 amounted to approx. USD 124 million, compared to approx. USD 103 million in the second quarter of the previous year, an increase of 21%;

Operating profit amounted to approx. USD 51 million, compared to approx. USD 27 million in the second quarter of last year, an increase of  87%;

Profit before taxes on income in the second quarter of 2016 totaled approx. USD 47 million, compared to a profit of approx. USD 24 million in the second quarter of last year, an increase of  99%;

Net profit in the second quarter of 2016 totaled approx. USD 35 million, compared to net profit of approx. USD 17 million in the second quarter of last year, an increase of 102%.

The number of passenger segments in the second quarter of 2016 increased by approx. 15% compared to last year; the Company's market share of passenger traffic at Ben-Gurion Airport increased to approx. 34.2%, compared to approx. 32.7% in the second quarter of the previous year.

Load Factor in the second quarter stood at approx. 82.3%, compared to 81.1% in the second quarter of last year; the Company's seat availability increased by about 10% and RPK increased by 11%.

Cash flow from operating activities for the second quarter of 2016 amounted to approx. USD 107 million, compared to approx. USD 79 million in the second quarter of the previous year.

The EBITDA  for the second quarter totaled approx. USD 96 million, compared to approx. USD 67 million in the second quarter of last year, an increase of 43%.

The Company's cash and deposits balances as of June 30, 2016 totaled approx. USD 264 million.

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El Al's CEO, David Maimon:

"I am pleased to present an improvement in all operational and financial parameters of the Company, including an increase of about 15% in passenger segments, a growth of about 10% in the volumes of the Company's operations, a market share increase to 34.2%, as well as growth in revenues and profitability despite the challenging competition and the drop in flight ticket prices.

We are happy to announce that we have decided to lease another 787-9 Boeing aircraft, thus, in total, the Company will receive 16 new Dreamliners into its aircraft fleet, commencing a year from now.

The FLY CARD credit card continues to serve as a major growth engine, currently with about 170 thousand holders. Recently we signed an agreement with Electra Consumer Products Group, providing unique benefits and enhancing the value for the FLY CARD holders.

We continue to maintain our position in the Israeli aviation industry as a leading and innovative company that offers its customers utmost comfort and technological innovation.

We are delighted to share the Company's success and improvement of its financial results with our shareholders, and today we announced an additional dividend distribution".   

Dganit Palti, El Al's CFO, stated:

"We completed the first half of 2016 and the second quarter of the year with a significant improvement in the financial results, mainly due to the growth in operations. The Company's fuel expenses decreased by about 21%, despite a 10% growth in operations.

The Company's cash flows from operating activities in the quarter increased to approx. USD 107 million, thus increasing the Company's cash and deposits balances to a level of USD 264 million.

The financial strength and business condition of the Company allow us to distribute a dividend and implement the Company's long-term strategy to expand its operations".

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Main Data for the Six and Three-Month Periods Ended June 30 (in USD millions)

Profit and Loss Results for the Three-Month Period Ended on June 30, 2016:

1. Operating Revenues – amounted to approx. USD 537 million, reflecting an increase of approx. 5.3% compared to the second quarter of the previous year, with a growth of approx. 7.9% in passenger flights. Said increase in revenue from passengers resulted from a significant growth in the number of the Company's passengers and the passenger revenue per kilometer (RPK) that was affected, inter alia, by the timing of Passover, which this year occurred in the second quarter, whereas last year Passover occurred at the beginning of April, thus departures for Passover holiday had already started in the last week of March. On the other hand, revenues were adversely affected by the continued trend of decrease in fight ticket prices as a result of the impact of the drop in oil prices and the intensified competition. In the Cargo Segment, the Company's revenues decreased by approx. 14.6%, mainly as a result of a drop in the yield of Ton-Kilometer and a decline in the amount of Ton-Kilometer flown.
2. Operating Expenses –amounted to approx. USD 414 million, reflecting an increase of approx. 1.4% compared to the second quarter of the previous year, mainly due to an increase in operations, disruptions in staffing flights (which began in October 2015 and continue until the publication of this report) and the need to find alternative solutions in connection therewith, as well as due to an increase in depreciation expenses, mostly arising from an increase in the number of the company's aircrafts and a change in the estimated residual value of the 777 aircrafts, as explained in Note 3.B. to the Condensed Financial Statements. The USD 32 million increase in operating expenses) excluding Jet Fuel expenses)  has been offset by the USD 26 million decrease in the Company's jet fuel expenses, as explained below.
3. Jet Fuel Expenses – the Company's jet fuel expenses, including hedging impact, declined by approx. USD 26.3 million (about 21%) compared to the corresponding expenditure of the previous year, as a result of a significant drop in the effective price of jet fuel, offset in part by an increase in the amount of jet fuel consumed due to the growth in the scope of the Company's operations (about 9% growth in flight hours).
4. Selling Expenses – selling expenses increased by approx. 5.8%, mainly as a result of the increase in the revenue turnover compared to the second quarter of the previous year.
5. Other Income, Net – in the reported quarter, the Company recorded other income of approx. USD 1.0 million in respect of capital gain from the sale of a 737-700 aircraft. In the second quarter of the previous year, the Company recorded other expense, net, of approx. USD 4.8 million, in respect of an early retirement plan for the Company's employees.
6. Financing Expenses –financing expenses amounted to approx. USD 4.5 million, compared to approx. USD 3.8 million in the second quarter last year. Said increase mainly resulted from exchange rate differences.
7. Taxes on Income – taxes on income in the reported quarter amounted to approx. USD 12.0 million compared to approx. USD 6.3 million in the second quarter of the previous year. This growth resulted from the increase in profit before taxes on income.
8. Profit for the Period – profit before tax in the reported quarter amounted to approx. USD 47.0 million (profit after tax amounted to approx. 35.0 million, constituting about 6.5% of the turnover), compared to profit before tax of approx. USD 23.6 million in the second quarter of last year (profit after tax stood at approx. USD 17.3 million, about 3.4% of the turnover).
9. Cash flows from operating activities – the Company generated positive cash flows from operating activities of approx. USD 107.2 million, compared to positive cash flows from operating activities of approx. USD 78.9 million in the second quarter of last year. This growth mainly resulted from the increase in profit before taxes in the reported quarter compared to the second quarter of last year, and from the fact that the cash flows from operating activities for the reported period were adversely affected (about USD 15 million) due to a payment for hedging transactions, which was not recognized in profit and loss.

Profit and Loss Results for the Six-Month Period Ended on June 30, 2016:

1. Operating Revenues – amounted to approx. USD 934 million, reflecting an increase of approx. 0.4% compared to the first half of the previous year, as passenger flights increased by approx. 2.4% in and cargo revenues decreased by approx. 12.0%. The main trends affecting operating revenues in the first half of 2016, compared to the first half of 2015, are substantially similar to the trends explained in the analysis of the results for the second quarter provided above (except for the timing of Passover Holiday). In addition, the Company's revenues for the six-month period were adversely affected by the erosion of exchange rates of currencies, in which the sales transactions of the Company are made, in relation to the dollar.
2. Operating Expenses –amounted to approx. USD 776 million, reflecting an increase of approx. 0.1% compared to the first half of the previous year, mainly due to an increase in operations, disruptions in staffing flights (which began in October 2015 and continue until the publication of this report) and the need to find alternative solutions in connection therewith, as well as due to an increase in depreciation expenses, mainly arising from an increase in the number of the company's aircrafts and a change in the estimated residual value of the Boeing 777 aircrafts. The USD 62.5 million increase in operating expenses (excluding Jet fuel expenses) has been offset by the USD 62 million decrease in the Company's jet fuel expenses.
3. Financing Expenses –financing expenses, net, totaled approx. USD 9.1 million, compared to approx. USD 11.6 million in the first half of the previous year. Said decrease mainly resulted from early redemption of a loan during the first quarter of 2016, as explained in Note 5.B.2 to the Condensed Financial Statements.
4. Tax Benefit – tax benefit in the reported period amounted to approx. USD 0.2 million, notwithstanding the profit recognized in this period, due to the reduction in the corporate tax rate in the first quarter of 2016, which resulted in the recognition of tax income on the date of the change, in the amount of approx. USD 3.8 million (see also Note 10 to the Condensed Financial Statements). In the corresponding period last year, income tax expenses of approx. USD 0.6 million were recorded.
5. Profit for the Period – profit before taxes on income in the reported period amounted to approx. USD 13.4 million (profit after tax amounted to approx. 13.6 million, constituting about 1.5% of the turnover), compared to profit before taxes on income of approx. USD 1.9 million in the same period last year (profit after tax stood at approx. USD 1.3 million, about 0.1% of the turnover).

Balance Sheet Data as of June 30, 2016:

1. Current Assets amounted to approx. USD 525.9 million, reflecting a growth of approx. USD 131.6 million compared to December 31, 2015. This growth mostly resulted from an increase in cash balances (see cash flow analysis below) and a seasonal increase in the Trade receivables item.
2. Current Liabilities amounted to approx. USD 915.1 million. The growth of about USD 72 million compared to December 31, 2015, mainly resulted from a seasonal increase in Unearned revenues from sale of airline tickets and an increase in Other payables mostly due to an increase in advances from customers, partially offset by a decrease in short-term borrowings and current maturities, and a decrease in the Derivative financial instruments item (see Note 4 to the Condensed Financial Statements).
3. Working Capital – as of June 30, 2016, the Company has a working capital deficit of approx. USD 389.2 million compared to a deficit of approx. USD 448.8 million as of December 31, 2015. It shall be noted, that a substantial part of the working capital deficit does not reflect short-term cash flows, as hereinafter explained. The Company's current ratio as of June 30, 2016 rose to approx. 57.5% compared to 46.8% as of December 31, 2015. The working capital of the Company consists of two substantial components, which are included in the Company's Current Liabilities items and are characterized by current business cycle; however, the Company is not required to use cash-flow sources in the short term in order to repay these components: Unearned revenues from the sale of airline tickets and from the Frequent Flyer Club, to be settled by providing future flight services, and liabilities to employees for vacation, which are expected to be paid over several years but classified as a short-term liability in accordance with accounting principles. Furthermore, as specified in Note 5.B.3 to the Condensed Financial Statements, a loan of about USD 30 million, the original maturity date of which is in April 2017, is expected to be settled over a period of 4 years, therefore it will be classified, starting from the financial statements for the third quarter of 2016, as a long-term liabilities. It shall be noted that the working capital is affected, inter alia, by the seasonality of operations and among others, by the timing of the holidays.
4. Non-Current Assets – amounted to approx. USD 1,288.6 million, showing a growth of approx. USD 18.8 million compared to their balance as of December 31, 2015, mainly as a result of receiving three 737-900 aircrafts, as provided in Note 3.A to the Condensed Financial Statements, less current depreciation.
5. Non-Current Liabilities - totaled approx. USD 675.2 million, reflecting an increase of approx. USD 48.9 million compared to their balance as of December 31, 2015. Said increase resulted mostly from loans obtained to finance the acquisition of three 737-900 aircrafts (see Note 5.B.1 to the Condensed Financial Statements) and an increase in deferred tax liabilities, mainly due to the improvement in the fair value of jet fuel derivatives, which in accounting terms were designated as hedging instruments, as well as due to profit before taxes on income for the period, offset by the decrease in the corporate tax rate.
6. Equity – amounted to approx. USD 224.3 million. The growth of approx. USD 29.5 million compared to equity as of December 31, 2015, mainly resulted from the profit for the period and the impact of the Company's hedging instruments on the equity funds, in a net-of-tax amount of approx. USD 35.2 million, offset by the impact of liabilities for employee benefits on the equity funds, in a net-of-tax amount of approx. USD 4.7 million. Additionally, the increase in equity was partially offset by a dividend of approx. USD 15 million, which was paid in April this year.

About EL AL

EL AL Israel Airlines Ltd. (TASE: ELAL) is the National Air Carrier of Israel. In 2015, EL AL recorded revenues amounting to nearly USD 2.1 billion. EL AL carries about 5 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 43 aircrafts, 28 of which are owned by the Company.

(www.elal.com)

Details of Conference Call

A conference call took place on Wednesday, August 17, 2016, at 12:30. A recording of the conference call will be available to those interested starting from August 17, 2016, at 17:00, until August 24, 2016, via phone number 03-9255927, as well as on the Company's Investor Relations website at: www.elal.com/investor-relations starting from August 18, 2016.

For further details: