The El Al Company responded: “Since the outbreak of the war and in light of its consequences, El Al has been in ongoing dialogue and full transparency with the Competition Authority on the issue of prices. We manage a strict price policy that is adapted to the situation, and we believe that the inspection will show that the company behaved fairly and appropriately, given the constraints of the time.”
Improvement in profitability despite the war
At the end of February, El Al Airlines published the The financial results for 2023, from which it emerged how much it managed, despite the war, to improve its profitability in the last quarter of 2023. In the last quarter of last year, El Al’s revenues jumped by 21% to $678 million compared to the corresponding quarter a year earlier. The management stated that its activity is about 90% compared to the corresponding quarter in 2019 (the eve of the Corona virus), which represents a period of full activity. The net profit in the last quarter of last year jumped to almost 40 million dollars in the final quarter of the year, compared to a net profit of 8.5 million dollars in the last quarter of 2022.
In summary of the past year, El Al’s revenues grew by 26% to a record level of 2.5 billion dollars, against the background of the high demand for flights and against the background of a shortage of production factors in the field of aviation (planes). As a result, the net profit increased last year by 3.5% to 112.6 million dollars, but the company still has a deficit in the equity amounting to more than 180 million dollars.
El Al, founded in 1948, currently employs nearly 5,000 people and operates a fleet of 47 aircraft that flies to 55 destinations around the world. stock El Al has risen by about 30% since the beginning of the year, with the company’s market value currently standing at about NIS 1.8 billion.
Bal Al claims that throughout the war they actively worked to lower the prices of flights. While normally the pricing of the flights works according to automatic systems guided by artificial intelligence, it is claimed that due to the war the company intervened in the systems actively in order to reduce the prices of the flights and prevent them from increasing despite the high demand.
The pricing method throughout the aviation world, the company claims, is based on the number of seats filled on the flight, and the stage at which the ticket was purchased. The fewer places left – the higher the price. Compared to last year, it is claimed, the flights are much more full, and therefore the prices that consumers now see when they try to book are also higher. The company also claims that since the beginning of the war, they have been accompanied by close legal counsel who is involved in the price policy every week, and have been in constant contact with the Authority.
Assessment: The reason being examined – excessive price
The competition authority has two avenues of action – criminal and administrative, when the same acts can be found out in both of these avenues, and what is decisive is the question of intent. The criminal proceedings are conducted in courts, after the Competition Authority submits indictments, and fines and prison sentences can be imposed there. The administrative channel is the one that focuses on money, and is much faster and simpler.
“The commissioner of competition can impose a sanction on a company of up to 8% of the sales turnover of no more than 100 million shekels,” explains attorney Dana Tirangel-Lifke, partner and head of the competition and antitrust department at the firm Amit Polk Matlon, who previously served in various positions at the Competition Authority, among other things as a senior official in the administrative enforcement department. “The supervisor’s discretion is broad, and she can also impose a million shekels on company officials, when the definition is very broad – not only a CEO, but also an official who was very involved in the matter.”
The standard of proof, she explains, is administrative, meaning 51%, and the procedure includes an inspection, a letter, a hearing and a decision, after which the company can appeal to the Competition Tribunal.
In relation to El Al, Attorney Tirangle-Lipka hypothesizes that the reason being examined is an excessive price – a reason that is relevant only to those who have a monopoly. El Al, she explains, is defined as a monopoly only in specific markets, such as Bangkok and Johannesburg, but it will be possible to determine that in wartime it had a monopoly in other markets as well.
Bel Al confirms that until March, its occupancy in Israel was over 50% (and at various stages it even reached 80%), but now, with the beginning of April and in view of the return of the foreign companies, the company claims that it is less than 50% %.
According to Attorney Tirangal-Lipka, “The Competition Authority does not like the pretext of an excessive price, but there have already been cases where it has followed it. A war, on the other hand, is not a case where a company did something special to ‘win’ a price increase, but external circumstances led to it.” Therefore, this case, she estimates, “is not one of the most complex that the authority has known.”