EL AL Signs its Largest Purchase Order to Date, for Up to 31 Boeing 737 MAX Aircraft, and Releases 2Q2024 Earnings

(Lod, Israel) Boeing (NYSE: BA) and EL AL Israel Airlines (TLV: ELAL) confirmed today that EL AL finalized an agreement for an order of up to 31 737 MAX jets – including a firm order for 20 jets and options for 11 more – in a deal worth $2.5 billion; the announcement came as EL AL announced both a 150% jump in quarterly profit and 33% increase in revenue in 2Q2024.

Photo courtesy of El Al’s USA-based Instagram account, @elalusa.

EL AL’s Boeing order is intended to support the airline’s plans to renew its fleet of Next-Generation 737 airplanes.

The agreement marks the largest purchase order in EL AL’s 76-year history. Per EL AL’s U.S.-based Instagram account, @elalusa, the deal marks a major milestone in the company’s strategic plan, which includes the modernization of EL AL’s fleet, integration of the latest technologies and increased seating capacity on its airplanes.

Even if the additional 11 jets are not realized, the deal is worth around $2 billion at list prices, and deliveries are expected from 2027, according to Skift.

EL AL already operates an all-Boeing fleet, comprised of about 44 aircraft – of these, 24 are the previous generation 737-800 and -900 type aircraft, and he remaining 20 planes are larger 777 and 787 Dreamliners, typically deployed on long-haul routes, per Skift.

"This is a significant milestone for EL AL, which will allow us to offer our customers the most advanced service and technology experience in the industry," said Dina Ben-Tal Ganancia. CEO EL AL Israel Airlines, as quoted in today’s press release from Boeing. "The implementation of the long-term procurement plan, which began with the purchase of additional 787 Dreamliners earlier this year and culminates in the current deal, once again demonstrates our commitment to the Israeli public and the state."

Per Boeing, with the 737 MAX family, EL AL will achieve the best per-seat economics in its class, improved environmental performance and increased passenger comfort. Specifically, 737 MAX will reduce fuel use and emissions 20% compared to the airplanes it replaces and have a 50% smaller noise footprint, according to Boeing.

"We are honored EL AL has chosen Boeing airplanes to power its past, present and future as we continue to build on seven decades of partnership," said Stephanie Pope, president and CEO of Boeing Commercial Airplanes. "We know EL AL depends on the versatility and reliability of Boeing airplanes, and we look forward to delivering the 737 MAX and 787 Dreamliner jets that will reshape and grow the airline in the coming decades."

EL AL’s 737 MAX order follows its purchase earlier this year of three additional 787-9 airplanes with options for six more, as the airline further expands its 787 Dreamliner fleet. EL AL will take delivery of a new 787-9 this year and plans to receive two more new 787-9s on lease in the coming years, according to Boeing.

In the wake of the Israel-Gaza war, which has resulted in EL AL being in some cases the sole and in other cases the most reliable option for many nonstop routes to and from Israel, EL AL is earning some of its highest profit margins ever, per Skift.

In the first quarter of 2024 – which is traditionally a weak season for the Israeli market – EL AL reported a 16% operating margin. Although only 3.5 million passengers flew to the country during the quarter – versus a forecasted 5.6. million – EL AL itself carried 1.4 million of those passengers, after expecting to fly only 1.1 million passengers; air cargo operations were also strong, according to Skift.

EL AL’s 2Q net profit of $147 million is up from $59 million a year earlier and prior to the war that began on October 7th. The carrier’s $839 million in revenue represented an increase of 33% from one year pro, and its passenger load factor rose to 92% from 87% as capacity was extended by 8%, according to Reuters.

Tel-Aviv listed shares of El Al fell ~ 2% to 542.20 ILA today despite the company’s earnings results.

Per Reuters, El Al has been criticized by customers in Israel and abroad for price-gouging, as it has emerged as a near-monopoly since the Gaza war triggered by the Hamas attacks in Israel, and has benefited as rivals have frequently cancelled services due to the security situation.

However, El Al rejects the criticism and has explained that half of those who had bought tickets this year were paying less than they were in 2023, according to Reuters.

Per Reuters, Ben-Tal Ganancia said many passengers have been booking relatively late given security uncertainties and that demand was greater than supply for EL AL’s flights; EL AL is also providing flights for a fee to stranded passengers from Greece, Cyprus and other areas, and has added flights to the United States and Asia.

In 2004, El Al became the first airline to install an anti-missile system on a commercial aircraft; the technology, involving a radar system that detects incoming missiles and ejects flares to confuse and deflect the missiles – was first developed for the Israeli Air Force’s Flight Guard, according to Infinite Flight.

As of today, per Wikipedia, EL AL is the only commercial airline to equip its planes with missile defense systems for protection against surface-to-air missiles.

** Not investment advice; The FLY Report is not a registered investment advisor.