EL AL | Full-Competition Year Could Deliver USD 750 million EBITDAR
Path to an EBITDAR of USD 750 million under full competition, positioning EL AL as a top investment opportunity among unique airlines within the thriving aviation sector.
Disclaimer: As of the publish date, I hold EL AL shares; this is not a recommendation or call for action. I may buy or sell shares without further notice. For informational purposes only.
In this analysis, I will explain why I prefer EL AL Airline over other airlines such as American Airlines, Delta, and United Airlines, and why I believe EL AL can maintain high profits relative to its enterprise value.
Background
EL AL is the national airline of Israel, which completed a significant turnaround from heavy debt to becoming cash-positive (where cash exceeds debt). Since the October 7, 2023 war, EL AL operated almost alone in Israel, allowing it to reduce its debt rapidly. Currently, the market questions the airline's ability to sustain these profits. I believe that EL AL remains the cheapest airline available in public markets and is capable of maintaining these profits over time, even in a competitive environment.
In my previous analysis, I discussed EL AL’s strengthening fundamentals and why the market underestimates its potential. Now, I analyze the numbers to test that thesis.
Index Position & Share Price
Currently, EL AL is included in the TA-90 index, which benefits from high international exposure. As of the time of writing this analysis, EL AL is ranked 36th (1st on TA-90), just ₪300 million below FIBI HOLDINGS, which is 35th on the TA-35.
Share price on the day of publishing this article: 1498
Methodology
Starting point: $498m EBITDAR. Twelve months of Q4 2022 to Q3 2023, pre-war condition.
Target: $700–750 million in a full-competition year (2026? likely not fully competitive). Below is a conservative bridge, along with an explanation of why it holds up.
Target Contribution Gap: USD 200-250 million.
Let’s Start:
1) Expansion of the Fleet & Increase in Ticket Pricing (the big lever)
Since 2023, EL AL has added ~8 wide-body aircraft by 2026, alongside a global ~6% per annum ticket price increase (Delta/United commentary, Europe’s record year). To remain conservative, count the fleet only and ignore the price: approximately $ 150 million in operating profit from wide-body capacity alone. With demand > supply (especially trans-Atlantic), realized pricing could be meaningfully higher.
Contribution: USD 150 million.
2) Air Cargo
Cargo yields are earned primarily on wide-bodies. With 787s 15→19 and 777s 1→5, and price tailwinds (incl. Houthi-driven reroutes), expect ≥+25% vs 2023.
Contribution: USD 20 million (at least).
3) Fuel & Efficiency
Lower jet fuel costs vs. 2023, combined with a progressively more efficient fleet and a lighter maintenance burden, equals tens of millions of dollars in positive impact.
Contribution: USD tens of millions.
4) Code-share (Delta, KLM, Air France, others)
A higher load factor (LF) allows customers to redeem points on EL AL's frequent flyer program (FFP).
Weekend monetization via “agent commission” on partner seats. EL AL doesn’t operate during the Sabbath (Friday night to Saturday night). The commission can be ~8% or more of the ticket.
Fewer destinations are operated directly: more destinations are accessible through partners, benefiting from ticketing economics and club value.
Increase in demand to the US from businesses and corporations, who can now travel with EL AL on weekdays and return during the weekend with partners (e.g., Delta).
One-ticket connectivity (Friday morning out on EL AL; Saturday connections onward).
Contribution: USD tens of millions (plus a structural LF (load factor) uplift & reward to FFP members).
5) Agent Commissions → Digital
Direct digital bookings are ~58% (vs ~33% in 2023). Direct digital orders save ~4% compared to agented orders.
Example: On $3B in sales, shifting +20% to direct at 4% saves ≈ approximately $24m in operating profit.
Contribution: USD 24 million.
6) Catering (In-House Kitchen)
New automated kitchen (≈$50m capex) launched end-Q1’25. Self-supply replaces the 2023 third-party costs, allowing external sales to other airlines. Enough to save $1/internal meal + earn $0.5/external meal sales ⇒ $10m+ contribution.
Contribution: USD 10 million (at least).
7) Loyalty & Fly Card
During 2023, the loyalty club earned ~$50m even after high interest payments to Phoenix; 2026 opens stronger (record members; ~13% share of Israeli credit cards in 2024).
The CAL contract will open in Q3 2026; the 2019 fee from CAL’s end to EL AL was $60m, likely to be higher for the next renewal.
Phantom option: 8.75% above ₪1.8 billion; As part of the 2018 loyalty agreement with CAL, EL AL holds an 8.75% phantom option triggered above a ₪1.8 billion valuation. This mechanism, which at the time looked ambitious, is now highly valuable: in September 2025 (as of the day of publishing this analysis), Calcalist (Golan Hazani) reported that Harel and Chorev signed a deal to acquire 72% of CAL from Discount Bank at a valuation of ₪3.75–4.0 billion. Based on this transaction, EL AL is expected to receive approximately ₪192 million (~$50 million), providing a clear, tangible upside from its loyalty partnership beyond core EBITDAR. [Source: Calcalist].
Contribution: USD 50 million (at least).
8) Dry-Lease Renewals (timing: 2029–2032)
On 8× 787-9 aircraft lease renewals are expected to be ~50% cheaper after 12-year terms, resulting in more than USD 50 million annual savings in the outer window (not 2026, but material to mid-term FCF).
9) Depreciation vs. Capex (2026–2027)
Capex maintenance: no new fleet beyond the #18 and #19 aircraft (dry lease ≈ $13m/yr each, vs today, ~50% higher). Result: excess depreciation vs capex → supportive cash conversion.
Remember: in about two years, EL AL will own a solid Dreamliner fleet with no debt, which will provide financial flexibility.
10) Flight Simulator for Pilots (Israel)
Until recently, EL AL trained pilots in Amsterdam. The training has now moved back home, reducing travel and increasing availability. It may seem like a small change, but it reflects the new operating approach and adds a few million.
11) Other revenues
Onboard Wi-Fi & duty-free scale with flights.
Travel insurance: a logical add-on (past intent with Phoenix; still to execute).
EL AL Protect (cancellation add-on): +$20 non-US / +$30 US. Every 10% uptake ≈ is approximately $13 million to operating profit (assuming no price give-back compared to 2023).
Company target: “other revenues” ~10% of total = $300–350m potential over time.
12) Labor
Most CBAs* are scheduled to open in 2028; pilots are expected to begin in March 2026. The current construct already accounts for approximately 6% of PBT; assuming a ~$20m incremental headwind in 2026, netted against the numerous tailwinds above.
*CBA = Collective Bargaining Agreement. It refers to labor contracts negotiated between the company and its unions (e.g., pilots, cabin crew, ground staff).
13) Forex (Foreign Exchange)
Current rates imply a $35–40m headwind, offset by stronger Israeli consumer purchasing power.
Putting It Together (Conservative)
Air Cargo: USD 20 million
Fuel & Efficiency: tens of millions
Code-share (Delta, KLM, Air France, others): tens of millions
Agent Commissions → Digital: USD 24 million
Catering (In-House Kitchen): USD 10 million
Loyalty & Fly Card: USD 50 million
Dry-Lease Renewals (2029–2032): contributing at least USD 50 million (mid-term)
Depreciation vs. Capex (2026–2027): cash-flow positive
Flight Simulator for Pilots (Israel): a few million
Other Revenues: potential of USD 300–350 million in revenue, directly impacting net profit
Labor: negative impact of USD 20 million
Forex (Foreign Exchange): negative impact of USD 35–40 million, against a stronger customer’s purchasing power
Total contribution (net): approximately over $250 million EBITDAR (including other revenues), leading to over $750 million EBITDAR annually.
Bottom line:
EBITDAR: $750m in a full-competition year.
Free cash flow bridge: subtract ~$250m (capex ~$80m, wet lease ~$50m, lease principal ~$120m) and apply ~15% taxes ⇒ ~$350–420m+ net cash flow. When the next fleet program begins, a deferred tax asset should form.
Balance sheet/valuation: By end-2025, EL AL should carry substantial excess cash; most “debt” is lease-related. On the above FCF, the EV multiple is <4× (even after lease principal, and excluding net interest income upside). For working capital, an airline rarely needs more than 15% of its revenue; call it approximately $500 million for EL AL.
Remember: lower jet fuel vs 2023, rising LF (load factor), durable global demand, constrained wide-body supply, code-share monetization, a new Dreamliner cadence, loyalty monetization options, and a widening direct-booking mix. The bridge is conservative; the full potential is not fully counted.
Before closing, I would like to extend my sincere thanks to Avishay Kalimi for his valuable insights and thoughtful contributions, which added meaningful depth and perspective to this analysis.
Holding, not a recommendation.