In JM Barrie’s immortal book, Peter Pan, the title character quips, “The moment you doubt whether you can fly, you cease forever to be able to do it.”
We have been at war for 19 months. At times, it feels like we are in Neverland, with our government playing the role of the Lost Boys, incapable or unwilling to grow up.
Incoming tourism to Israel has plummeted to record lows, and while many foreign carriers have returned, several have simply written us off the map.
Let’s try to separate the wheat from the chaff. Giving credit where credit is due belongs to El Al. When most airlines stopped flying to Israel, El Al persevered. When other airlines, either from their own government’s warnings, lack of insurance, or the near paucity of any incoming tourism to Israel, simply stopped flying, El Al continued.
While both the airlines and the flying public thought it would be a short-term pause, for well over a year, and in many instances even longer, most of the airlines landing in Ben-Gurion Airport could be counted on one hand.
El Al continued to fly, even though incoming traffic dropped to numbers not seen since the Yom Kippur War 50 years earlier. The scarcity of tourists did not nettle El Al; it simply raised fares to the maximum, and those customers who had to fly paid. What was once seen as a poor investment started showing phenomenal results.
Consumers complained, as El Al published figures every quarter showing profits going up, up, and up. Yes, they would promise to lower fares to specific destinations, but to many continents, be it North America or Europe, they had the skies to themselves, and people paid. Oh yes, people paid. Airfares this last winter reached levels never before seen.
Business people have to fly, and fares for premium and business classes filled the coffers of anyone wise enough to own shares in El Al. While the Israeli taxpayers continued to front the majority of all Israeli airlines’ security costs, El Al reached an agreement with the government to pay dividends to its shareholders.
This is no insignificant amount. The Israeli airline has now announced that it will be able to distribute up to 30% of its net profit in 2025 and up to 40% in 2026-2028. The average dividend yield in the US stock market as a whole is 2.22%, while the average dividend yield for stocks listed in the service sector in the S&P is 2.37%.
El Al faces a new wave of competition
This wave of historic profits continued month after month until many foreign airlines saw that there was money to be made and that the small, insignificant Israeli consumer could be persuaded in the middle of a never-ending war to travel abroad. The two Arab airlines, Emirates and Etihad, continued flying, and Ethiopian Air also has been flying for most of the war.
It was the European airlines that decided to test the waters. A dash of Lufthansa, a bit of Air France, and the flood gates opened with most of the European airlines returning. To the United States, where El Al was operating with over 80% of the market capacity, United and Delta came back.
Long forgotten were their feeble excuses that insurance premiums were too high or that their labor unions were opposed to flying to Israel. Still, the Israeli public has been slow to embrace them. We saw how quickly they turned tail, and with no end in sight for the war, the overwhelming feeling is to stick with an Israeli carrier. This antagonism will diminish when, day after day, these foreign carriers continue to fly.
Do take note that you won’t see, like you had in the past, advertisements from these companies touting their return. Do not expect to see billboards in Tel Aviv trumpeting United or British Airways’ return to Israel. They are keeping a low profile and relying on word of mouth and travel professionals to promote their products.
Their Israeli managers, too, are afraid that their presence is temporary. Buyer beware remains the sentiment, but with El Al’s fares so frustratingly high, more and more Israelis are willing to put their feet and derrière on these planes.
AFTER MONTHS of careful consideration, Arkia, the smallest of the Israeli airlines, decided to heed the grumbling public and technology executives lamenting El Al’s high fares and charter a plane to New York. Surprisingly, as an all-economy aircraft, the vast majority of flyers were those traveling for leisure, not for business. This non-stop option found enough consumers to get Arkia through the spring and the summer.
This month, it is going full throttle.
Arkia will be switching its wet lease operator from an Iberojet all-economy A330-900neo to a GullivAir A330-200 on May 14. GullivAir, a Bulgarian company, has a lie-flat, though dated, business class product with 19 direct aisle-access seats in a 1-2-1 configuration, making this cabin a first for Arkia. The company says it has seen “great success and high demand” with its route launch, with service now extended through October 23.
Israir, the third Israeli airline, is going after El Al differently. Having received FAA approval, they will operate their aircraft, set up a marketing company in the United States, and plan to commence operations in time for Passover and Easter in the spring of 2026.
While El Al’s fares this spring and summer are down 10% from a year ago, there is little reason for them to lower their prices anymore. Let us delve deeper into the reason behind these continued high prices.In 2023, the annual total number of air passengers entering and departing Israel reached over 21 million travelers. This reflected an increase of about 10% from the previous year. Keep in mind that we “lost” most of the last three months of 2023 when the October 7 massacre took place.
Of those 21 million passengers originating from Ben-Gurion, on average, filled 55% of every plane. In simple terms, 45% of those planes from Britain, France, or New York were consumers starting their trip abroad. Once the war broke out, those numbers plummeted and have yet to recover or show any signs of recovery.
This last Passover saw a smattering of tourists, primarily those coming to visit their family members who reside here. Did you notice many Christians visiting the Holy Land for Easter? It would have been surprising since they did not come. Nor are many tourist groups planning to come to Israel this summer. Most of the foreign airlines report that the ratio of passengers originating in Israel versus abroad is now at an 80/20 ratio.
The result is that while there is renewed competition to El Al, with so few incoming tourists, most of these foreign carriers are not eager to start a price war.Furthermore, three airlines have unequivocally said they are not returning.
VIRGIN ATLANTIC has officially canceled its route between Heathrow and Tel Aviv.
The carrier launched daily flights to Ben-Gurion in September 2019, only for them to be suspended a few months later following the onset of the COVID-19 pandemic. The route returned and increased to as many as two daily flights before again being suspended in October 2023 as a result of the war between Israel and Hamas.
It had been due to restart in September last year, but this did not come to fruition, and Virgin has now confirmed that the route has been canceled. Their current press release said: “After careful consideration, our partners at Virgin Atlantic have made the difficult decision to cancel services between London Heathrow and Tel Aviv.”
They will keep a code share with El Al on flights to and from London so that one can continue to North America, but they’ve shuttered their office. Their Israeli CEO, Shai Weiss, decided that flying to Seoul, South Korea, offers a greater economic return than flying to Israel. I guess his bean counters have calculated that the risk of North Korea causing a conflagration is less than the war in Gaza continuing.
British Airways’ response was to offer two daily flights between London & Tel Aviv.
Finally, the rabid antisemite, Recep Tayyip Erdogan, who fuels his hatred toward Israel and the entire Jewish people on a near-daily basis, is both the president of Turkey and head of the government-owned Turkish Airlines. At 70 years old, he is content with no resumption of their flights to Tel Aviv; he’s given orders that their landing slots at Ben-Gurion Airport be relinquished.
This draconian decision by both Turkish Airlines and another government-owned company, low-cost Pegasus Airlines, to forego their take-off and landing slots in Israel is a serious escalation in Erdogan’s visceral hatred of all things Israeli.
To summarize the tourist industry today, all you need is faith, trust, and a bit of Pixie Dust.
Mark Feldman is the CEO of Ziontours Jerusalem and a director at Diesenhaus. For questions and comments, email him at [email protected]
