Also, what do you folks think of these ideas by an FT poster for how to fix LY?
(The following are snippets of his posts, so they aren't coherent if read as a whole since he was responding to questions)
In the past, LY existed because it was state owned and therefore did not need to really compete in the marketplace. Since privatization the new owners, the Borovich family, were not able to remove the inefficient vestiges of EL AL's state owned corporate enterprise culture and position it for fierce private sector competition that is focused on the consumer.
Given EL AL's over $50 million loss in 2011 and their projected loss for 2012 I don't think the Borovich family will be able to keep this company afloat for much longer. Based upon this belief, I have lined up investors and we will purchase the assets of the airline from the bankruptcy trustee, should it collapse, and reconstitute EL AL into an efficient modern customer service oriented operation.
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I know the problems associated with EL AL very well. Basically, should EL AL go bankrupt, it would be relatively easy to reconstitute the airline. I would purchase its assets ( mainly facilities, slots, etc) from the bankruptcy trustee, and form a new corporation under Israeli law. Though named EL AL Israel Airlines, this new entity would be free from all of the old EL AL's debt obligations, including union contracts.
I would then invite any and all former EL AL employees to apply for jobs with the new EL AL. It goes without saying that I would NEVER hire any of their current managers, including but not limited to Shkedy and Saadon.
From there I would bring in someone I know in the industry who is an excellent operations manager to map out streamlined and rational operations.
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As far as the fleet is concerned, I would keep all of the 737's for short haul/European routes, replace the 744's with A380's 1 for 1, and replace all of the 767's and 777's 1 for 1 with A330s. The hard product on the entire long haul fleet would be standardized with lie flat seats in business, semi-enclosed cabins in First (First will only be on the A380s) and an advanced AVOD system. The frequent flier program and website will emulate what United has, and I will both expand codeshare agreements and get EL AL into an alliance; preferably OneWorld.
Since the new EL AL will have streamlined management, efficient aircraft, and the ability to compensate all employees at market rates (and not more) our yields will go up and we will be able to open more routes such as San Francisco and perhaps even Buenos Aires. We will turn TLV into as much of a connecting hub as possible by offering and promoting east/west fares with a stop in TLV and scheduling arrivals/departures accordingly so as to be able to do so.
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1. Obviously not being able to overly the Middle East to the Far East adds time to the sectors and fuel costs, however most, if not all, of LY's far east routes they currently fly using a mix of 744/777/767 are profitable. If we utilize more efficient A330's and, on occasion, A380's the yields will be higher and the routes will be even more profitable, thereby negating somewhat, the added fuel and sector time costs.
2. The government will most certainly allow LY to go bankrupt. It was Netanyahu who, as finance minister, spearheaded privatization. When I spoke with Danny Saadon in New York he told me that part of the problem why the unions will not negotiate in earnest is their belief that the government will never let the company go bankrupt, a belief that he and I both agree is wrong for the above reason.
3. If the government allows LY to go bankrupt, the assets of the company will be in the hands of the bankruptcy trustee who will sell them to the highest bidder in order to pay out the creditors. The bankrupt EL AL legal entity will be no more. My investors and I will create a new legal entity, call it EL AL, incorporate as much of EL AL's assets into the new legal entity as possible, and reconstitute a new airline. The only thing that will remain is the EL AL name, the facilities/slots we buy from the old entity, and any employees we hire. However, should the government step in and try to revive the old EL AL entity, all of this will be mute, though I don't think that will be the case. Consequently, Chaim Katz will have no say whatsoever in the new legal entity.
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This is proprietary information which I will not disclose in a public forum but what I will say is that EL AL's current net worth, when you subtract liabilities, is around $35 million. This $35 million figure includes equity in some of the aircraft they own (primarily the 772's) none of which I want, except for the 738's.
As far as my investor pool is concerned, it consists of American Jews and American Evengelical Christians. None of them are investing for the purpose of making a profit. They are all investing because they believe, as do I, that the State of Israel needs a viable national carrier and we do not want to see the EL AL name go by the wayside as so many long standing carriers have in recent years.
As far as management is concerned, we will have at minimum 60% less VP's and managers. We will close down many offices (particularly in Europe) where activities are redundant and quite frankly can be handled out of TLV, London, or Paris. I will be the CEO of the new EL AL and will leave my post after 4 years by which time I expect to have accomplished most, if not all, of what I want for this new carrier.
During and after the start up phase, I plan to rely heavily on the regulars in this forum to not only advise on the specific seats and IFE to purchase, but on Matmid benefits, flight schedules, and personal observations of what the old EL AL did right so we could replicate it, and what the old EL AL did wrong so we can avoid it. I will be personally in touch with the frequent posters here and will always be accessible to them.