El Al milks monopoly on Tel Aviv – New York flights

Since the outbreak of war last October, US airlines have dramatically reduced their flights to and from Israel and have now cancelled all of them, leaving El Al Israel Airlines Ltd. (level:Ilal) as the sole carrier on the Tel Aviv-New York route. This situation was clearly demonstrated in El Al’s second-quarter financial report, where the Israeli airline captured a market share of 88.2% on the Tel Aviv-New York route, compared to 35.5% in the second quarter of 2023.

Before the latest wave of cancellations by US airlines, which began in late July, El Al was competing with Delta Air Lines and United Airlines. Delta canceled all flights to Israel through the end of August, and United canceled all flights through at least the end of October. American Airlines, which has not returned to Israel since the start of the war, has suspended all flights to Israel until April 2025.

As a result, airfares have soared. A round-trip ticket on El Al to New York in September 2023 cost $1,430, and next month it will be $1,759. Last year, during the Jewish holidays, a round-trip ticket to New York cost $1,500, and this year, a round-trip ticket during the holidays, which all fall in October, is $2,000.

What will happen to airfare prices if US airlines resume flights? “Delta’s ticket prices have fallen to the same level as El Al’s, and direct flights (marketed according to the planned return date) are much higher than in previous years,” says Yoni Waxman, vice president of Offer Tours.

slight difference in dates

Pricing in the aviation world, as in many areas, depends on supply and demand. In aviation, it also depends on how far in advance a ticket is purchased, according to algorithms powered by artificial intelligence. El Al passengers are encouraged to buy a ticket as soon as possible, but at the same time they explain that due to the pricing method – according to which the cheapest tickets are sold first and over time the price rises to a maximum – it is difficult today to find flights at the lowest prices, as supply is lower than usual.

Globes investigated whether there is a significant difference in ticket prices on short-haul dates compared to long-haul dates. According to an examination on the El Al website, the minimum ticket price to New York next month will be $893 one-way. During Passover 2025, the fare will be $890 one-way – the difference is minimal. It should be emphasized that on dates when demand is higher, prices naturally rise.

El Al was recently subject to an investigation by the Israel Competition Authority, which is investigating whether there was a violation through the use of “unfair” pricing (a section of the Competition Law relating to abuse of a monopoly position), due to allegations of excessive price increases. The Competition Authority’s investigation is complex and can take a long time, as it relies on a large amount of data and criteria that influence how airline tickets are priced. When the Competition Authority investigation was revealed, El Al claimed that it had actively interfered with its systems in order to lower prices.

However, El Al’s financial results in the second quarter showed a record profit of $147.4 million, which is 2.5 times larger than the profit of $58.9 million in the corresponding quarter of 2023. The occupancy rate on flights in the second quarter rose to 92% from 87% in the second quarter of last year. change in price fluctuations

After the war broke out, El Al adopted a capped pricing system that involved lowering the maximum price for each flight, without changing the minimum and average prices. Consequently, price differences changed. In practice, this meant that more passengers were forced to pay fares close to and above the average, while once competition returned on some routes, El Al returned to its normal pricing policy, raising prices. At the same time, it should be noted that the cancellations of low-cost airlines since the war broke out have made connecting flights more expensive. British airline EasyJet announced the longest flight suspension (until the end of March 2025) by low-cost airlines in the current wave of cancellations, and Ryanair also appears to be extending its flight cancellations (until the end of October). This situation continues to make it difficult to travel to low-cost destinations, which are often used as stopovers for onward flights to the United States.

Moreover, there is no certainty that US airlines will resume flights on the announced dates, with industry estimates that the chances of that are low, as these major airlines carefully consider their next steps and are subject to intelligence-based civil risk management systems.

“From the perspective of American airlines, Israel has become an unstable region that is difficult to manage compared to alternatives,” says Nechama Ronen, head of the Maman Group, which serves global airlines in Israel. “It is very difficult for these companies to start and stop operating a route, open and close the reservation system, charge customers fees and refund them. For them, the easiest thing is to move the aircraft to an alternative route with a stable revenue cycle, where they make maximum profits.”

This article was published in Globes, Israeli Business News – en.globes.co.il – on August 19, 2024.

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