Tuesday, 16 June 2015

Interview: David Maimon, El Al CEO

El Al nearing widebody fleet renewal: CEO

Israeli flag carrier El Al is evaluating the Boeing 787-9 and the Airbus A350-900 for its upcoming widebody renewal, chief executive David Maimon tells Flightglobal.

The all-Boeing operator issued an RFP in April and has now “started the negotiations” with both manufacturers. It expects to place firm orders for at least 13 units, replacing all of the ageing 747-400s and 767-300ERs.

“We are talking about the 787-9 or 350-900,” Maimon confirms. “The first step will be only to replace the 747s. The next step will be to replace the 767s … four or five years after.”

He does not rule out breaking Boeing’s longstanding monopoly, insisting “both of them are good aircraft” and “anything is possible”.

El Al cancelled a commitment for 787s in 2006, citing a desire to focus on restructuring after its privatisation. Washington’s close political ties with Tel Aviv make Boeing the default choice for El Al, but the publicly-traded company enjoys more commercial independence today than when it was under full state control.

The airline also has outstanding orders for three 737-900ERs, which Maimon says will arrive in the first quarter of 2016.

El Al confirms interest in Israir merger

El Al is negotiating a possible takeover of Tel Aviv-based Israir and could absorb the airline’s assets into either its charter or low-cost divisions.

“We are checking the option of merging Israir with Sun D’Or, our charter company,” chief executive David Maimon tells Flightglobal.

“There’s a lot of options. One is to increase the charter [services at Sun D’Or]. Second will be [utilising] the infrastructure for a low-cost carrier. So everything could be considered … It’s premature to decide if it will work.”

Maimon says Israir’s tour operator, Natour, could also plug a gap in El Al’s product offering.

Israeli daily Ha’aretz last month reported that El Al had begun preliminary talks with IDB Tourism Group, the owner of Israir.

The takeover target’s fleet comprises two Airbus A320s and two ATR 72s. Though not a natural fit for El Al’s low-cost brand UP – which deploys four Boeing 737-800s – a merger could unlock cheaper labour costs at the no-frills division.

El Al launched UP in March 2014 following the signing of an open-skies agreement between Israel and Europe. UP took over the mainline unit’s routes from Tel Aviv to Berlin, Budapest, Kiev, Larnaca and Prague.

Maimon says the unit’s performance to date is “close to our budget”, although Kiev traffic is weak due to the conflict in Ukraine.

He rejects suggestions that UP has an uncompetitive cost-base for a budget carrier, pointing to savings from simplified on-board service, reduced crew complements, and a 20% ground-handling discount overseas.

“The only thing that is not reduced is the salary of the pilots and the other staff,” he says, adding that cuts may be considered “in the future”.

El Al eyes more American cities

El Al will evaluate further US route launches after Boston becomes its fifth North American destination on 28 June, joining New York JFK, New York Newark, Los Angeles and Toronto.

Chief executive David Maimon tells Flightglobal that “tough competition” with US airlines post-consolidation has forced the Israeli flag carrier to grow in America with its own metal. He says the US is “the most important region” in El Al's network.

“[After] the mergers that happened in the United States between US-American, United-Continental, Northwest-Delta, they cancelled the agreements that we had with them … Everything except the codeshare with American [Airlines] via Europe. So it’s difficult for us to take our business segment inside America.

“For this tough situation one of the solutions is to open new routes ... We are looking for another destination, but it takes time.”

El Al announced a codeshare agreement with JetBlue in September 2014, initially covering domestic flights from New York. It has since moved to expand the partnership to include onward flights from Boston. But despite calling JetBlue a “wonderful company”, Maimon insists the tie-up is “not enough” because the low-cost carrier lacks the scale of “the huge companies”.

He adds that joining an airline alliance is not an option for El Al, claiming that previous overtures by the Israeli flag carrier have been rebuffed for “political” reasons.