El Al Israel Airlines Is the Israeli Designated Carrier on Most Routes to and from Israel
Total Page:16
File Type:pdf, Size:1020Kb
Free Translation of the Hebrew Language Financial Report - Hebrew Wording Binding EL AL ISRAEL AIRLINES LTD. FINANCIAL STATEMENTS AS OF JUNE 30, 2015 (unaudited( CONTENTS SECTION A - UPDATE OF CHAPTER A TO 2014 ANNUAL REPORT SECTION B - DIRECTOR'S REPORT SECTION C - FINANCIAL STATEMENTS Free Translation of the Hebrew Language Financial Report - Hebrew Wording Binding Update to Chapter "A" (Description of the Corporation's Business)1 Of the Periodic Report for the Year 2014 ("Periodic Report") Of El-Al Israel Airlines Ltd. (hereinafter: "The Company") The following are updates to Chapter A – Description of the Corporation's Business: General The Group's concise consolidated financial statements (hereinafter: "Interim Financial Statements") have been prepared in accordance with International Standard IAS 34, "Interim Financial Statements". In the framework of the preparation of these Interim Financial Statements, the Group has applied accounting policy, presentation rules and calculation methods identical to those applied in the preparation of its financial statements as of December 31, 2014, and for the year ending on the same date. As regards new accounting standards adopted and the change in the accounting policy relating to the presentation of the impact of the results of foreign currency hedging transactions, see Note 4 to the Financial Statements as of June 30, 2015 and Section D1 (2) of the Directors Report on the State of the Corporation's Affairs as of June 30, 2015. This update contains material changes or novelties that have occurred in the Company's business during the second quarter of 2015 and which must be described in the Periodic Report. This update refers to section numbers as they appear in the Description of the Corporation's Business Chapter in the Company's Periodic Report for the year 2014, which was published on March 25, 2015 (Reference No. 2015-01-060379). In reference to Section 4 – Dividend Distribution For details regarding the announcement of dividend distribution after the date of the Report of the Financial Position, see Note 12 to the Interim Financial Statements as of June 30, 2015. In reference to Section 6.1 – International Aviation Traffic - and to Section 7.1.3 (A) – Changes in the Volume and Profitability of Operations in the Segment – International Developments IATA data for January to May 2015 indicate an increase of 6.3% in passenger traffic on both international and domestic flights together, with international traffic alone reporting an increase of 6.5% compared to the corresponding period last year. Airline seat supply on international flights increased by 6.2%. Load factor on international passenger flights was 78.2% compared to 78.1% in the corresponding period last year. 1 The update is in accordance with Section 39A of the Securities (Periodic and Immediate Reports) Regulations, 5730-1970, and contains material changes or novelties which have occurred in the corporation's business in any matter that should be described in the Periodic Report. The update refers to section numbers as they appear in the Corporate Business Description Chapter of the Company's Periodic Report for the year 2014, which was published on March 19, 2014. Free Translation of the Hebrew Language Financial Report - Hebrew Wording Binding By Regions: January to May 2015 compared to January – May 2014*: Region Passengers RPK ASK PLF (Annual change) (Annual change) Africa -2.6% -2.9% 65.7% Asia 8.6% 6.7% 77.5% Europe 5.2% 4.2% 80.0% South America 6.4% 6.4% 79.3% Middle East 12.1% 15.3% 77.2% North America 2.3% 3.5% 79.3% Total 6.5% 6.2% 78.2% *The above table describes international traffic data only. ASK - Available Seat Kilometer – Available Seat-KM: number of seats offered for sale, multiplied by the distance flown. RPK - Revenue Passenger Kilometer – number of paying passengers, multiplied by the distance flown PLF - Local Factor – occupancy rate on passenger flights (percentage of seats used). According to the data provided by IATA, during January to June 2015, an increase of 3.5% was recorded in air transportation of cargo (international and domestic together), compared to the corresponding period of the previous year. In reference to Section 6.2 – Israel Aviation Traffic - and to Section 7.1.3 (B) – Changes in the Volume and Profitability of Operations in the Segment – Developments in the Israeli Market According to the data provided by the Central Bureau of Statistics, in the second quarter of 2015 about 1.3 million departures of Israelis by air were recorded, constituting an increase of approximately 6% compared to the corresponding quarter of the previous year. In addition, about 719 thousands of tourist arrivals by air (to Ben-Gurion Airport and Eilat) were recorded in the second quarter of 2015 (not including day trips), constituting a decrease of about 15% in relation to the corresponding quarter of the previous year. In this respect it should be noted that tourist arrivals are still affected by Operation Protective Edge which took place in July-August 2014. According to the data provided by Israel Airports Authority, an overall decrease of approximately 2% in the international traffic at Ben-Gurion Airport was recorded in this quarter compared to the corresponding period last year. The average load factor on passenger flights was approximately 80.9%, compared to 83.7% in the second quarter of 2014. An increase of approximately 5.6% in cargo traffic was recorded in the second quarter of 2015 compared to the second quarter of 2014. Free Translation of the Hebrew Language Financial Report - Hebrew Wording Binding In Reference to Section 6.3 – Fluctuations in Jet Fuel Prices – and to Section 9.5.1 – Raw Materials and Suppliers - Fuel In the second quarter of 2015, the average jet fuel price for the Company (before hedging activities) dropped by approximately 37% compared to the corresponding quarter of the previous year. The average effective jet fuel price for the Company, after hedging activities, dropped by approximately 30% compared to the corresponding quarter of the previous year. In the second quarter of 2015, fuel expenses represented approximately 24.8% of the turnover (whereas in the corresponding quarter of the previous year, fuel expenses reached approximately 31.5% of the turnover). In Reference to Section 6.4 – Fluctuations in Foreign Currency Rates As of June 30, 2015 a devaluation of approximately 9.6% occurred in the exchange rate of the NIS against the US dollar compared to June 30, 2014, and a reduction of about 3.2% compared to December 31, 2014. As of June 30, 2015, a devaluation of approximately 22% occurred in the exchange rate of the Euro against the US dollar compared to June 30, 2014, and a devaluation of about 7.8% compared to December 31, 2014. For further details, see Section B1 (5) of the Directors Report on the State of the Corporation's Affairs as of June 30, 2015. 1. Passenger Aircraft Operating Segment In Reference to Section 7.1.3 – Changes in the Volume and Profitability of Operations in the Segment In June 2015 IATA published a new profit forecast for 2015, whereby the world's airlines are expected to present a profit of USD 29.3 billion (compared to the USD 25 billion predicted in the December 2014 forecast), thus constituting an increase of approximately 79% compared to the 2014 profit. Airlines profit in 2015 constitute about 4% of the airlines' revenue, which is expected to reach approximately USD 727 billion. The data contained in the following table refer to airlines' overall operations on international and domestic flights together, by region: Region Profit Performance 2015 2014 forecast for appraisal for versus versus 2015 2014 2013 2014 2013 (in USD (in USD (in USD (in USD (in USD billions) billions) billions) billions) billions) North America 15.7 11.2 7.4 4.5 3.8 Europe 5.8 3.3 1.0 2.5 2.3 Asia 5.1 1.2 1.9 3.9 -0.7 Middle East 1.8 0.7 0.3 1.1 0.4 South America 0.6 0.0 0.2 0.6 -0.2 Africa 0.1 0.0 -0.1 0.1 0.1 Total 29.3 16.4 10.6 12.9 5.8 Source of data: ICAO 2013 data, 2014 and 2015 data – IATA Forecast and Estimate Free Translation of the Hebrew Language Financial Report - Hebrew Wording Binding The data indicate that about half of the overall profit, USD 15.7 billion, is attributed to the North American airlines, but airlines of all the regions in the world are expected to show improvement in the results. The reasons for the expected growth in airlines' profits based on IATA forecast are the improvement in the global economic, the drop in oil prices and the increased efficiency of the airlines. The major factors described by IATA in its revised 2015 forecast are set forth below: Passengers – passenger traffic is expected to cross the USD 3.5 billion mark and increase by 6.7%, the highest growth rate since 2010 and higher than the 5.5% trend recorded in the past 20 years. Passenger traffic accelerates due both to the improvement in the global economy and to the fact that passengers enjoy discounted flights, as the average price of a round-trip flight (before extra charges and taxes) is expected to be USD 429, 64% less than the price 20 years ago. Fuel prices – IATA estimates that fuel expenses of the airline companies will drop to approximately USD 191 billion, constituting 28% of the overall operation costs thereof. IATA's forecast is based on jet fuel prices, which are expected to reach an average of 78 dollar per barrel in 2015; it should be noted that jet fuel prices as of the second quarter of 2015 amounted to an average price of 63.5 dollar per barrel.