ABTN speaks to Uri Danor, El Al’s CEO for Northern Europe, about the expansion out of the UK, the Sabbath dilemma, and why Russia is taking on the US in terms of market share...
You’ve been in your position for five years. How has the aviation business changed?
The whole business environment has changed in the last five years. A very short while after I started Israel and the UK signed a new air service agreement. Before that time only two airlines were permitted to fly – British Airways and El Al. From our business perspective it was very convenient because the only other option was a charter flight.
After the agreement the whole picture changed and it became much more interesting. Two airlines decided to join the race because they saw that Israel had developing traffic. From one side we had Bmi starting a daily flight and moving at one point to two flights daily with a wide body aircraft. At the other end, Easyjet started a low cost option. At that time we were flying Heathrow and added Stansted from time to time when we needed more capacity.
Personally I liked the competition. Before it was boring. It’s not good for the customer and for me. When you have competition you can use all your capabilities and creativity. We reacted very quickly. We had two possibilities. One was to shrink and give up on some of our customers and try to make money on less capacity. Such a policy is good for the short term, your profit can be good, but in the long run you can lose your customers to your competitors. The other option was to expand and fight both in terms of product and frequency, and that’s what we did.
We couldn’t expand at Heathrow because of the limit in slots. There was quite a big geographical area in the North of London where we have a lot of customers, so we decided to use Luton airport. It’s very convenient, and very quick to get through. However, Luton is known as low-cost and we were afraid the image of the airport would affect demand – so all our passengers can use the priority lane. We also adopted the lounge there and spent money on it, invested in it.
Within a very short time the flights were full. It wasn’t just additional capacity – it was also because it was an early flight. From Heathrow the earliest flight was 3.30pm, but we put this one at 12 noon. Now we are double daily from Heathrow and daily from Luton, though it changes sometimes depending on demand. One of those Heathrow flights is usually a B747, but we use B777 and B767 aircraft depending on the season. At El Al we have a fleet of around 32 aircraft.
It must be more difficult to improve onboard product when you’re using the same fleet as the rest of El Al...
You have no choice, you have to invest and a lot was done. We changed the configuration of business class, and for the older planes which didn’t have the most advanced inflight entertainment we put in portable DVD players that were free for business class passengers, and a small price in economy. And we changed the food. We don’t have any issues with passenger satisfaction. We get very high scores and it is one of the biggest assets of El Al. They are very professional, service-orientated and very well educated.
The airline is principally point to point from the UK. The timing of the flight does not enable us to have immediate connections in Tel Aviv. Now we have the Luton flight we can get traffic going via Tel Aviv to South Africa, Johannesburg and Beijing and Hong Kong in China. And we have many flights down to Eilat. Flying into the UK passengers can connect at Heathrow with our codeshare partner American Airlines.
How has El Al’s loyalty programme developed?
We have invested in it for the SME sector. We created Embassy Programme so companies can earn as well as the individual flyers. It can be used for upgrades, free tickets and the travel manager gets a gold card status. It started slow, but it has picked up now. We have quite an attractive frequent flyer programme (El Al Matmid) and there is a family programme, where the whole family can earn together.
Does El Al have to make a profit?
Yes, we are a private company with shareholders. If we don’t make a profit we will be closed. It’s not a government company.
Not flying on the Sabbath must be difficult...
It’s a very big dilemma. On the one hand we think we should fly daily operations like any other carrier, on the other, a very substantial part of El Al passengers to the US are the strictly orthodox, and they are important to us. For them, it’s a strict business decision – the fact that we don’t fly on the Sabbath is very important to them, and they choose us ahead of the competition because of that. The income from that is second only to the business traveller, and since there is less business travel on the Saturday anyway, it isn’t so bad. It’s more for leisure, but yes, it is a problem because there are costs in not flying. But it’s the customers telling us not to fly on the Sabbath, not El Al telling the customers.
What do you think the future holds for you and El Al?
For me, I would like to be involved in business development with El Al, because I feel that with the competition we face now, we need other ways of raising revenue. Not just selling tickets but becoming a total travel company around the ticket. Relying only on the profit on the ticket is very risky. We just opened a route to South America. It’s a very long flight, 16 hours, and that needs stabilising. I think we will concentrate on what we have. We also have to look at the low cost activity to Israel from the UK, Switzerland and Germany, for instance.
Israel is an expanding market with immigration and a good economic situation. We are very strong there. But we live in a transparent world where everyone can see that and more competition is coming every day. On the US routes, for instance, we have US Airways, Continental, Delta and Air Canada all competing with us. One of the biggest markets developing is between Israel and Russia. It is step by step becoming the size of the US. It is helped by the fact there are so many people who came to Israel from Russia and many people speak Russian, but also by the practical reason that there is no need for a visa, which helps a lot.