Globes reports that less than two years have passed since El Al Israel Airlines (TASE: ELAL) was on the point of collapse, following the outbreak of the Covid-19 pandemic that almost entirely shut down its activity. The company accumulated huge losses, its financial statements bore a going concern qualification from its auditors, and it had to undergo a rescue plan that included cash aid from the state and a new owner, Kenny Rozenberg, who took over the airline from the Mozes-Borovitz family.

Now, El Al’s position has changed from one extreme to the other. The rapid recovery in the tourism industry after the pandemic died down has brought back the familiar crowding at Ben Gurion Airport, and ticket sales are back to pre-pandemic levels.

At the same time, in the past few months the airline has benefitted from two exogenic factors that can be expected to have positive effects on its first quarter results: the weakening of the shekel against the US dollar; and the plunging price of oil.

To some extent, this is already priced into the company’s stock, which has risen by over 20% so far this year, giving El Al a market cap of some NIS 750 million.

The fall in the oil price is, as mentioned, one of the factors supporting El Al’s share price, because of the expected effect on the company’s jet fuel costs. Last year, El Al paid $584 million for jet fuel, representing 35% of its operating expenses.

The price of a barrel of oil is currently $68, down 35% within a year. The oil price shot up last year following Russia’s invasion of Ukraine, raising the fear that global sales of Russian oil would be restricted, but it has since declined. One of the causes of the decline is greater oil production in the US.

Source - Globes/Twitter - Image - TPS