El Al finds a less turbulent flight path

By Dan Martin, May 9, 2008

It can be demanding when the El Al security regime cross-examines you to discover what is the purpose of your visit to Israel, who do you know in the country, whether anyone has asked you to carry a gift to someone there — and umpteen other intimate questions. So next time, how would you like to break off half-way through to switch on the kettle, step into your slippers, and slump into your living-room sofa while you recapture your strength to go on?

That could well be an option within months, when El Al — that most security-conscious of airlines — starts offering its UK passengers the choice of checking in their luggage from their home. According to the airline’s president and chief executive, Haim Romano, the early check-in from home is part of his next tranche of reforms to sharpen El Al’s edge in an ever-more competitive industry.

“Already a person flying from London can do their whole check-in online,” Mr Romano says in an interview at his headquarters, deep inside Ben Gurion Airport. “But we’ve also started a service in Tel Aviv whereby you can check in from home. A company comes to your house to do the security, and takes your luggage to the airport, so that you can go straight to border control. That’s coming to London — we hope for next autumn.”

The service — which currently costs a family of four around $59 in Tel Aviv — is part of Mr Romano’s grand plan to remake Israel’s 60-year-old airline.

“We’ve invested a lot in upgrading the product — a total of more than $40m,” he says. “Even the look and feel of economy class, where we’ve changed the upholstery of seats, the curtains and carpet. We just migrated our reservation system to Amadeus, and we’ve upgraded our call centre.”

The results are starting to pay off. After a troubled few years — not helped by September 11, the intifada and the Lebanon war — El Al is back in the black. In March, it announced annual revenues of $1.93bn, up 16 per cent on the previous year. More importantly, it turned a $40.7m pre-tax loss to a $40.4m pre-tax profit. “I’ve been here three years, and I had to make a lot of changes,” Mr Romano, 53, says. “I’m trying to take this company to the right place, and to close the gap faced by El Al in the past few years through circumstances such as September 11, the intifada, and the way the government ran this company before privatisation. We have to close that gap.”

It has not been easy. “The economy here [in Israel] is OK,” he says, “but the clouds are not far away. And we see the winds blowing them towards us. In our business, we are so easily affected by external elements — the fuel price, the dollar rate... The cost of food has increased our expenses by 2-3 per cent alone last year. It’s a labour-intensive company. This is the reason my hair is grey.”

Oil price rises led him to raise ticket prices again last month, something he had “no choice” but to do.

So how is El Al, never known as a low-cost airline, going to compete against the new budget operators opening up the UK-Israel market?

“We’re not low-cost, and we can’t be low-cost when the cost of the operation is so high, and people are demanding the best service,” he says. “So an accurate comparison is to airlines like British Airways, Lufthansa, Continental. And we are cheaper than BA to New York from Tel Aviv — business class with BA is £4-5,000, whereas with us it’s $4-5000.

“Compare us to bmi or Thomsonfly, and it’s not the same product.

"For other companies, you are just a P&L [profit and loss]. For us, you are a long-term client. It’s that long-term relationship with you and your family that is important to us — so we don’t take you for granted. And we have additional security costs, which makes every ticket more expensive.”

He feels that El Al is disadvantaged at present against the new low-cost operators. “We think competition is good for the industry, but the question we’re raising to the Israeli government is whether the competition is fair,” he says. “Bmi gets some advantages that we don’t. We don’t get the right slots at Heathrow.”

Yet London is a key focus of Mr Romano’s investment strategy. “For us, London is second to New York as the most strategic route, because of the Jewish community’s loyalty to Israel, and that of the business community. We feel very committed to the community there, which is why we decided to allocate two services a day with our new Boeing 777s. It’s a big deal for us. When we got the 777s, we decided to use them on the Newark and London routes.

“We just signed a contact with Boeing — an intention to purchase four more 777s. We get them by 2012/13, hopefully earlier.

“The message is that we were here in the bad days. We are here in better days. We’ll be here tomorrow as well. El Al is not just an airline. El Al is a symbol — the airline of the Jewish state, the Jewish nation. The only airline that carries the Magen David, that has its whole planes kosher, where you can read Hebrew, that keeps shabat, where the crew is Jewish...”

After all, as the airline’s latest TV commercial declares — based on an idea from its employees — “we know you have a choice”.

Running an airline, Mr Romano reflects, “is like rafting — you can’t control the river, the depth of the water, the speed of the water or location of the waterfalls. But if you know how to paddle, you win — and if you don’t, you die. You can’t drift. Our strategy is investing in our product and in our customer service, being more efficient, and more accurate in the way we give you information. And doing everything to keep the uniqueness of El Al.”

First class Heathrow-Tel Aviv: £1,998 return. Reservations: 020 7121 1400; www.elal.co.il

Last updated: 2:23pm, September 10 2008