Monday, November 8, 2010

El Al joins Montenegro race

El Al has Montenegro Airlines in its sights
Following the example of the Israeli based Arkia Airlines, its main rival, El Al Israel Airlines, has purchased tender documentation needed for the takeover of 30% of Montenegro Airlines’ shares. El Al has been keen to become a part owner of the Montenegrin carrier for several years. Last year, the airline planned to partner up with the European Bank for Reconstruction and Development and become Montenegro Airlines’ strategic partner. However, the plan fell through after the Israeli carrier requested control over Podgorica and Tivat Airport, which was not to the government’s liking.

El Al has a fleet of 40 aircraft and operates to over 40 destinations worldwide. The airline carried 3.8 million passengers on scheduled flights in 2009. One of the conditions for the purchase of Montenegro Airlines is for a carrier to have carried 2 million passengers or over in 2009. However, the other bidder, Arkia, carried only 710.000 passengers last year. Whether the government will make an exception for the abovementioned rule remains to be seen. Last week, the Montenegrin Prime Minister met with Arkia CEO and owner in Tel Aviv.

So far, no other airline has expressed interest in the Montenegrin carrier. Airlines have until December 15 to place their bids. The government has not set up a starting price for the 30% share package.

Note: In the original article published at 9.00 CET the wrong 2009 El Al passenger statistic was provided. It has now been amended. Apologies for the oversight.

18 comments:

  1. With the size of El Al's fleet plus the destinations, 1.9-2 million passengers transported seems rather small considering, some of the EX Yu carries do just over 1 million passengers with a smaller fleet and a smaller number of destinations.

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  2. @Peter from SYD

    I believe EL Al doesn't do a lot of transfer, if at all, through their Tel Aviv hub. (They do interline on ex-TLV flights in GRU to EZE, MVD, SCL, LIM, etc.) But some flights that El Al fly generate extremely high yield. Flights to Johannesburg, Mumbai, Beijing and Hong Kong face zero competition. (Finally, Emirates fails to caputre their transfer traffic! :P) El Al's flight to Hong Kong is a golden fountain. But I don't think it's appropriate to elaborate too much on Ex-Yu. Contact me for more data if you're interested.

    Back to topic: I fail to see what kind of network syndery LY would create with YM. Maybe they're just preventing the Turks to have too much geopolitical influence in the Balkan?

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  3. I will join Peter`s comment.
    Both El Al`s and YM`s fleets need capacity for utilization. By joining the problem, it can only escalate.
    On the other hand it seems that Akria does not meet criteria...

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  4. Akira does not meet the criteria for YMs sale, and should publicly be removed from the tendering process.

    My hunch is that Akira has been used to try to lure LY back into the tendering process by the Montenegrin govt - whilst handing over the airports is not liked by the govt officials, their proposal obviously warrants a second look.

    The big question: irrespective of who YM is sold to, will it solve the airlines numerous problems?

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  5. Israel is a nice place to visit. I went there this year on business and I intend to return within 3 months.

    It would be nice to have another, cheaper, way to get to TLV from the Balkans.

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  6. Did a quick search and found out that El Al transported 3.5 million passengers in 2005. So I guess we can assume that it transported 4 to 5 million in 2009?

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  7. doesn’t make sense to me neither that number of 1.9 million passengers.
    can some1 explain to me what represents a prime motive for el al to purchase MA shares?

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  8. @MN

    Carrying Israelis to vacation destinations. Israelis travel on vacation more than almost any other nationality.

    Russian is a very common language in Israel. You could get by in Tel Aviv knowing only Russian. You could probably get by these days in MNE knowing only Russian.

    Seems logical that an Israeli carrier would be interested in promoting and developing a not-so-far vacation destination for Israelis where a common language of their people is spoken and where there's not a history of animosity towards Israelis.

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  9. It does not seem logical to by an airline in the country where your local people may plan to spend their vacation 3-4 months p.a, especially if you have underserved capacity of 40 a/cs in one, plus dozen in the other airline company in the country of origin.

    On the other hand side, this strong Israeli interest can be explained throgh PPP, where Montenigrin govt. will do some "paperwork" on open-sky papers, while YM with new owner will start to utilize its very large fleet in that case through off-Mne linkages Europe wide.

    This PPP approach may result in case which may bring many benefits not only to El Al and YM.

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  10. Sorry for misswording in my previous post.
    It is not "to BY", but "to BUY".

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  11. @ Aero
    I assume that PPP refers to Passenger Protection Program?

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  12. PPP stands for "Public Private Partnership"

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  13. @Arturo

    Why wold Israel care about Turkey's influence in the Balkans? The Balkans are nowhere near Israel and Israel does not have so many companies in the Balkans to contend with Turkish takeover.

    In general though, Israel is a solid investor due to its richness in enterprise and economic activity with the West. I think that both Arkia and El Al are solid investors for Montenegro Airlines. But I'm not sure why Turkish Airlines is not participating. They have nearly 50% of B&H, and are most likely going to go for JAT. I would really like to know why they are not interested in Montenegro Airlines.

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  14. I don't think that Arkia is solid investor, it has already destroyed Balkan Bulgarian Airlines ...

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  15. El Al might have carried 1.9 Million pax to North America only!

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  16. @Jesbusman

    That's why I didn't call it an argument ;) Let's think as a paranoid Israeli. The Turks got a huge say in all ex-Yugoslavian countries. The relationship between Turkey and Israel deteriorate. The Turks discretly call on the Serbs to deny fly over rights to the Israelis. How would that affect El Al's flight to Europe?

    We will never think in such logic. But it's Israel, who knows?

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  17. I'm pretty sure the Israelis know full well that Serbs could never pull such a stunt.

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  18. @Arturo

    Israel invests more in Serbia than Turkey through its European affiliates. They even had plans of opening a business park in Belgrade and constructing one of he tallest buildings in Europe right in front of my grandfather's house in Spanski Boraca! This was rejected by the Belgrade Government of course, but Israel has invested more in Serbia than in any other Ex-Yu country and it does so with good reason. I don't think that Israel has anything to fear with Serbia. But you are right, they are quite paranoid when the Middle East and Turkey come into question ;)

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