ELY001

http://www.ynetnews.com/articles/0,7...312536,00.html

Seems like EL AL made $37 million profit last quarter. So far this year, they lost around $30 million in the first 2 quarters and now they are up by $7 million as of the end of Q3. Does anyone think EL AL will be able to make a profit for the year given that Q4 is generally a bad quarter for the company, there was a missile war from Gaza, and the airline had to absorb losses from over 5000 tickets being sold for under $350 as a consequence of mismanagement by the NY office?

Also, does anyone think 'Shkedy' will remain CEO for much longer? Heard he released a 20 year plan but front line employees lack faith in his abilities.

yosithezet

Welcome to FlyerTalk ELY001!

LatusElAl

Shkedy should be toast. Should be.
That's from a professional standpoint.
Problem is that the majority shareholders - Knafaim (Borowich family) are a group of inept people who seem to have been passed over when the Jewish financial genes were distributed. They are more interested in a having a General at the helm than they are in running a business. I know from friends in the financial world who have been approached by the Borowich tenticles to raise capital that these people are clueless - a far cry from the prowess you find typically in Israeli/Jewish companies.

Happens to be the Shkedi, while professionally inept, is a very nice person - and very traditional in his Jewish orientation. Problem is that he lacks - even several years into his tenure - he lacks in depth knowledge and understanding of both commercial aviation and the financial world. Shkedi would be great at shooting missiles out of the sky, but not so good at sending passengers point to point.

ELY001

Latus,

Thanks for your reply. It's not just 'Shkedy' who is inept, in my opinion. I had the pleasure of meeting with Saadon once and I found that he lacks basic knowledge of the airline industry as well, despite his over 30 years at EL AL. They think that EL AL is the greatest airline in the world and that it's problems stem from factors beyond their control, such as Israel's geo-political situation, fuel prices, etc. They don't want to hear that EL AL's problems center on flying old inefficient ac, utilizing a substandard hard product on long haul routes, bloated management, the inferiority of the "Matmid" program when compared to ff programs of other airlines such as LH, UA, DL, or US, and the inability to get into an alliance, amongst other things.

Not quite sure 'Shkedy' would be great at "shooting missiles out of the sky". He was commander of the IAF during the second Lebanon War and was unable to both stop the missiles nor shoot any out of the sky. I remember him being quoted as blaming everything but himself for that. Now as CEO of EL AL he blames the fact that EL AL is a Jewish company for its inability to enter an alliance, and even the global financial crisis for EL AL's $50 plus million dollar loss last year even though load factors were good and fares to and from TLV were sky high all the while other airlines that fly to TLV such as UA and US say TLV is one of their most profitable routes.

I wrote an entire business plan for EL AL on my own and submitted it to the Borovich family. Got some interesting responses. =)

EL AL's biggest problem is that when the company was privatized, the Borovich family did not restructure it from an inefficient State Owned Enterprise to an efficient private one. Therefore, the vestiges of EL AL's state owned enterprise mentality in management remains in tact and EL AL is unable to produce sustained profitability despite TLV being a hot destination and a top money making route for most airlines that fly there.

sds1493

It would be interesting to read how your correspondence went and what your business plan for LY was.

ELY001

Sds,

My plan came in the form of 2 letters. The first I mailed directly to 'Shkedy' in November of 2011. That letter led to my meeting with Saadon in May of this year. After my meeting with Saadon I wrote a second, more extensive letter, where amongst many issues I discussed the need to change EL AL's managerial corporate structure. I know for a fact the second letter was circulated amongst the Board and was passed onto Shkedy. In fact, Tamar Borovich herself forwarded it to Shkedy and Shkedy sent me a confirmation that he received it.

Interesting thing is that in the first letter I heavily critiqued the "Hahi B'Bait B'Olam" slogan and informed them that just about every Israeli I met laugh at that slogan and the slogan really does not capture the essence of EL AL, its mission, nor its services. I gave an example of Singapore Airlines' former slogan "A Great Way to Fly" as an example of a good slogan that captures an airlines essence and mission. Needless to say, rather than delve into some serious thought about a new, more appropriate slogan, 'Shkedy' came out with a New Year commercial centered on "Hahi B'Bait B'olam" where the commercial failed to demonstrate exactly how EL AL will make you feel at home through their service and product offering. It seems as though that commercial is reflective of management's attitude that since the company is Israeli it automatically deserves the patronage of certain ethnic/religious groups.

ELY001

Latus wrote:

"Happens to be the Shkedi, while professionally inept, is a very nice person - and very traditional in his Jewish orientation. Problem is that he lacks - even several years into his tenure - he lacks in depth knowledge and understanding of both commercial aviation and the financial world. Shkedi would be great at shooting missiles out of the sky, but not so good at sending passengers point to point."

Actually Latus, perhaps reading the opinion of Captain Nir Tzuk, head of EL AL's pilots union, may change your mind with regard to Shkedy being a nice guy. According to a Globes article, which I provide the link below, Tzuk states ""Regrettably, talks with management have failed. The CEO has announced that he is not interested in moving forward on issues that are important to the employees, and on which agreements have already been reached. Even issues that are supposed to save the airline millions of dollars, and which have been under discussion for a long time, were recently rejected by the CEO. We feel that ego and personal honor are dictating his position"

Nice guys do not engage in spiteful behavior driven by ego considerations. A CEO who is guided by 'personal honor' when making decisions vital to a company lacks the requisite characteristics necessary to be in leadership.

http://www.globes.co.il/serveen/glob...63528&fid=1725

yosithezet

Why would you do that? Were you trying to leverage it into a consulting gig?

Personally, I like the slogan. It could be used in a much better way, but the slogan isn't a negative IMHO.

ELY001

Yosithezet,

When I wrote the two letters which form the business plan, my intention was and still is far from obtaining a consulting gig with EL AL. I wrote the first letter in 2011 because it was the first time I had flown EL AL in 5 years and was negatively stunned by what I encountered throughout the whole experience from reservations to the very condition of the ac (flew on 4X-ELE to TLV and 4X-ELA back to the USA). In my opinion EL AL really deteriorated and I was genuine in my desire to help clue Shkedy in as to what had to be done. A few months after I sent that letter, I got a call from Danny Saadon's secretary asking me to come to the NY office for a meeting with him. It was after my meeting with Saadon that I began to understand just how inept EL AL's management was which led me to write a second, more extensive letter, which got circulated amongst the board and forwarded it to Shkedy.

As a kid, I developed a love for the airline industry because of my fondness for EL AL, and I just could not sit back and watch the company disintegrate without doing anything.

Interestingly enough, when I met with Saadon he told me that the proposals in my first letter were nearly identical to the ones made by an outside consulting company that was hired a few years prior. Needless to say, one of the recommendations I made in my second letter to the EL AL board was to stop wasting the company's money hiring outside consultants who lacked a vested interest in the implementation of their recommendations and instead hire managers/executives with actual knowledge of the airline industry who can come up with their own business plans for the company as part of the normal course of their work.

entropy

LY has a lot of changes they need to undertake, I'm not familiar with their corporate overhead but I suspect it is bloated and inefficient. I'd wager they could probably save a max of ~10 million a year by rightsizing that, but the cost doesn't scale with the airline.

LY also suffers from running an unnecessarily complicated fleet (3-4 different 747 configs), 762, 763, 777 which is deployed sub-optimally. At least they ditched the 757 (despite it being a great plane); and lacks a domestic north american network to compete with CO and DL and no lie-flat seats.

Their lousy website and the lack of connections bookable online means they lose a lot of distribution fees; unlike corporate overhead, that scales with the $'s sold.

ELY001

Entropy,


All of the things you mention, I wrote in my business plan to EL AL including recommendations on how to remedy the situations and what measures to take. First, they need to rationalize the fleet. Second, they need to standardize the hard product and bring it up to speed with international standards. It is completely unacceptable that the hard product (inc VOD, etc) is not standardized through the entirety of the long haul fleet. This creates a situation where, even within a subfleet consisting of the same ac type, the hard product is different. A prime example being the mood lighting and more advanced VOD on 772ER's 4X-ECE & 4X-ECF compared with the rest of the 772ER fleet. Passengers, especially ff's expect and demand standardization. When I fly on UA from EWR on a long haul flight, I know what to expect by way of hard product because it is standardized throughout their long haul fleets. This is one of the reasons why I fly UA everywhere I go these days, including TLV.

As far as management being bloated is concerned. You are correct on that point. There is a joke inside EL AL that goes something like this...."there are as many managers/executives as aircraft in the fleet." These managers not only garner 6 figure salaries (in dollar terms) but there are numerous redundancies between them which adds to inefficiency and expenses. Additionally, the unions, particularly the pilots one, are outraged that management expects them to engage in cuts and givebacks while they (management) remain bloated with high salaries. In my conversation with Saadon, I sensed the adverse posture he and management have towards employees.

If EL AL is ultimately to survive as an airline, the above issues, amongst many others, must be addressed immediately. Their corporate culture needs to change, and they need to embrace new thinking and new business practices.

simba8

eh,
Arent most companies in Israel run like El Al?
Sounds like your from West and just like you , they tend to see things through their own lenses and at times without the benefit of understanding where some of the business are coming from. Although you could be right about everything that you say (probably are)... why would they listen to you?

There is very much a "insider" vs "outsider" mentality that exists in most Israeli companies. I dont think EL AL is the exception.
I dont think el al is the only airline or company that needs this.

TWA884

Anyone, regardless of credentials, can propose business plans. Some have merit and most do not as they grossly underestimate expenses and overestimate potential revenue. Would you mind sharing your professional or academic qualifications with us?

entropy

I forgot to mention what I think of hachi bbait baolam... I think its absolutely true, LY is just like Israel. Which means that they do some things well, but behind the scenes, its a balagan, and they either like it that way or don't care (yihihe beseder), and the fact that planes fly at all is a miracle. Some of us believe that Israel (and LY) should be capable of more.


ELY001, glad you're pushing them to improve...

ELY001

Entropy,

I personally do not like the "Hahi B'Bait B'Olam" slogan as I do not believe it captures the essence of EL AL and its mission like the Singapore Airlines slogan I quoted does for that airline.

However, I do agree with you that it's a miracle EL AL even exists. Given Israel's geo-political circumstances maintaining a viable privatized national airline is indeed a high order to accomplish. However, the balancing act that has been done since privatization cannot continue forever. You can't have a small airline with bloated inefficient management and old inefficient planes with an inferior hard product and poor ff program sustain $50 million plus losses periodically and survive over the long haul. Ultimately, unless EL AL is restructured and some serious managers are put in place, the airline won't survive; which is a scenario I want to help prevent which is why I took considerable time devising a credible business plan for the company.

TWA 884,

For privacy issues, I do not wish to give more background about myself, however it's safe to say that since my first letter got me an invite to meet with the Sr. VP for North American operations and our meeting lasted well over 1 hour, my credentials are top notch. I don't believe EL AL's management would invite someone to meet with a SR VP in charge of their most important bread and butter market and who does not fly the airline much if that persons credentials and plan did not warrant further merit.