Just a few years after coming close to bankruptcy, Israel's El Al Airlines (ELAL.TA) became dominant in the country's aviation sector thanks to its near monopoly status during 18 months of war. Now, its challenge is to sustain that position.
Following a ceasefire deal with Palestinian militant group Hamas in January, foreign carriers have begun to resume flights to Israel after halting them for much of the last year and a half, although with less capacity and frequency.
But it could take time to earn the trust of travellers fearful of cancellations should the ceasefire collapse, which means Israel's flag carrier and its smaller rivals Arkia and Israir (ISRG.TA) - hope to see the benefits for longer.
El Al believes that even as foreign airlines slowly resume their flights, it will be able to compete by appealing to customers as "the Spirit of Israel". To that end it expects to receive five more 787s, while retrofitting older Boeing 777s. It also recently ordered 737Max aircraft to replace its short-haul fleet.
"The tipping point for me is that with El Al, I know I'll get home," said Gary Sugarman, 60, chief executive of Israeli medical technology startup Motion Informatics, a frequent traveller who thought El Al was a "terrible" airline until its ownership change in 2021.
With El Al one of the only carriers flying to Ben Gurion Airport near Tel Aviv since the war began customers accused it of price-gouging and taking advantage of a war situation.
El Al, privatised two decades ago, says prices in 2024 only rose an average of 14% over 2023, similar to the industry and citing a shortage of aircraft, engines and parts and supply chain delays. Much of the high fares came after foreign airlines cancelled last minute and people sought flights on El Al.
Others defended the airline for continuing to fly during the war when foreign carriers stopped flying.
But with capacity limited and planes full, fares on some key routes were far higher than in past years, leading to nearly five-fold jump in 2024 net profit to $545 million on a 37% rise in revenue to $3.4 billion.
"The laws of supply and demand were exacerbated by war," said James Halstead, an aviation analyst and managing partner at Aviation Strategy. "In the short term, it's benefiting strongly. Once things settle down and we have peace and other airlines come back, most profits will disappear."
Globally, limited capacity and strong consumer demand has pushed up air fares with major U.S. airlines forecasting strong profits this year, while earnings at most European airlines are expected to improve as well. But U.S. President Donald Trump's broad tariffs have upended that optimism.
El Al has set a 2030 target of $4 billion in revenue and a 25% share of passenger traffic at Ben Gurion. For the first two months of 2025, the number of passengers at Ben Gurion airport was up 71% to 2.2 million, with El Al's share at 47%, according to the Israel Airports Authority.
Its shares are up 35% in 2025 after a 130% jump last year.
FINANCIALLY FRAUGHT HISTORY
El Al flew 6.6 million passengers last year, up 19%, and its market share at Ben Gurion nearly doubled to 48%. Overall, passenger traffic at Ben Gurion fell 34% last year.
Between 2018 and 2021, El Al had posted more than $1 billion in losses, partly due to intense competition that worsened during the Covid pandemic when El Al stopped flying and auditors attached a "going concern" warning in its financial reports.
Some lawmakers had argued that Israel no longer needed a national carrier but the government in 2021 provided a $210 million bailout package on condition of steep spending cuts and a cash injection from the airline's new owners.
At the outset of the war, El Al, Arkia and Israir operated rescue flights for stranded Israelis from Greece and Cyprus, while also bringing soldiers and citizens pressed into reserve military duty back to Israel. It also served families of hostages held in Gaza after the October 7, 2023 attacks by Hamas.
El Al, with a fleet of 45 aircraft, eliminated routes and used hubs in Athens, Larnaca and New York and using code-share deals with Delta (DAL.N), Virgin, Air France (AIRF.PA) and others to get customers to their destination.
For its part, Arkia, which mainly flies to Europe, launched flights to New York three times a week on a leased plane and Oz Berlowitz, CEO of Arkia, said he hopes to add another aircraft to make the route daily.
"Competition is always good for clients and also because the Middle East is a very shaky place," he said.
