El Al looks for new CEO to con­front chal­lenges ahead

Jerusalem Post - - BUSINESS & FINANCE - By MICHAL RAZ-CHAIMOVICH

On Wed­nes­day, on the eve of the pub­li­ca­tion of El Al Is­rael Air­lines Ltd.’s third-quar­ter re­sults, David Mai­mon, the com­pany’s CEO for the past two and a half years, an­nounced his res­ig­na­tion. In a let­ter to the com­pany board of di­rec­tors, headed by chair­per­son Eli De­fes and vice chair­per­son Tamar Borovitz, Mai­mon wrote: “I want to no­tify you of my de­ci­sion to leave my po­si­tion as CEO of El Al after four years in this chal­leng­ing job.

“I have served in var­i­ous po­si­tions in the com­pany for over 12 years, dur­ing which I was priv­i­leged to be part of a spe­cial and un­usual or­ga­ni­za­tion with enor­mous im­por­tance for Is­rael and the en­tire world... I want to thank you for en­abling me to re­al­ize the vi­sion and busi­ness plan I pre­sented when I be­came CEO, which in­cluded buy­ing new planes, ex­pand­ing the net­work of routes, launch­ing the Fly Card credit card and ex­pand­ing for­eign avi­a­tion ac­tiv­ity (in­clud­ing ground ser­vices), with an em­pha­sis on stream­lin­ing... I will con­tinue to lead the com­pany with full grav­ity and ef­fort un­til a new CEO is cho­sen and a process of over­lap is com­pleted.”

Mai­mon’s salary dur­ing his term was over NIS 11 mil­lion.

Sirkis and Eshel can­di­dates to re­place Mai­mon

Mai­mon’s an­nounce­ment did not sur­prise peo­ple in the avi­a­tion in­dus­try. He al­ready hinted in an emo­tional speech fol­low­ing the land­ing of the first Dream­liner in Is­rael that he had reached a peak. Many had bet that he would an­nounce his res­ig­na­tion in 2017 at an im­por­tant junc­ture for the air­line: On the one hand, new routes were launched and 16 Dream­lin­ers were pur­chased, while on the other hand, El Al’s share price plum­meted 52% dur­ing the past year. Fuel prices are soar­ing, and Mai­mon faced one of El Al’s big­gest crises – a la­bor dis­pute with the pi­lots’ com­mit­tee, which dis­rupted many of the com­pany’s flights and caused last-minute flight can­cel­la­tions and de­lays, for which the air­line had to com­pen­sate its pas­sen­gers.

There are also many open ques­tions about the ac­qui­si­tion of Is­rair Air­lines and Tourism Ltd. The deal is wait­ing for ap­proval from the An­titrust Author­ity di­rec­tor gen­eral, and it has been learned that the Is­rael Air­ports Author­ity op­poses it. The op­po­si­tion is due, at least of­fi­cially, to con­cern about dam­age to com­pe­ti­tion in in­ter­nal flights in Is­rael op­er­ated by Arkia Air­lines Ltd. and Is­rair, es­pe­cially to Ei­lat. The Air­ports Author­ity fears that El Al may de­cide to dis­con­tinue Is­rair’s in­ter­nal flights and use the air­line’s planes for in­ter­na­tional flights, giv­ing Arkia a mo­nop­oly in the in­ter­nal-flights mar­ket.

It is also pos­si­ble that the Air­ports Author­ity is con­cerned about a pos­si­ble loss of more than $100 mil­lion in an­nual fees from El Al. Air­lines with a mar­ket share of over 30% get a 20% dis­count on their fees, and a merger with Is­rair is likely to push El Al’s mar­ket share above 30%. Will Is­rair be man­aged in a dif­fer­ent man­ner than Sun d’Or and UP, which op­er­ate as two brands within El Al (the pas­sen­ger traf­fic fig­ures for the two com­pa­nies are not listed separately even in the Air­port Author­ity’s re­ports)? The vi­sion in the Is­rair deal is to con­tinue op­er­at­ing it as a sep­a­rate en­tity, in­clud­ing its air fleet and pi­lots, who will fly planes only for Is­rair, and whose salary terms will not change.

It can be as­sumed that the Air­ports Author­ity’s op­po­si­tion to the deal will end with re­stric­tions on the re­la­tions be­tween the two com­pa­nies, in­clud­ing a com­mit­ment to the con­tin­u­a­tion of Is­rair’s in­ter­nal flights.

Mean­while, Mai­mon’s res­ig­na­tion is spark­ing spec­u­la­tion about po­ten­tial re­place­ments. The names men­tioned in­clude Is­rair CEO Uri Sirkis, who is re­garded as a dom­i­nant per­son­al­ity with vast knowl­edge and ta­lent, who has led his com­pany to im­pres­sive achieve­ments. The “prob­lem” with Sirkis is that he is com­mit­ted to Is­rair, and some be­lieve that El Al’s board of di­rec­tors will pre­fer to ap­point a less-dom­i­nant CEO. From within El Al, vice pres­i­dent of com­mer­cial and avi­a­tion re­la­tions Go­nen Usishkin, ap­pointed to his po­si­tion a year ago, has been men­tioned as a pos­si­ble can­di­date. Go­nen has worked in El Al man­age­ment and as first of­fi­cer for 13 years.

An­other can­di­date men­tioned is Ye­hu­dit Gris­aro, who has been vice pres­i­dent of hu­man re­sources and ad­min­is­tra­tion for the past six months. One avi­a­tion-in­dus­try source also men­tioned chair­per­son De­fes as an in­ter­est­ing op­tion. Two for­mer IAF com­man­ders have been men­tioned as can­di­dates: Maj.-Gen. (res.) Ido Ne­hosh­tan, who was IAF com­man­der un­til 2012 and is cur­rently an ex­ter­nal ad­viser to eco­nomic en­ter­prises; and Maj.-Gen. (res.) Amir Eshel, who is just now leav­ing the air force.

‘El Al ne­glected mar­ket­ing’

Mai­mon is leav­ing a great deal of work to his suc­ces­sor, a vet­eran travel agent said, adding: “El Al’s board of di­rec­tors led Mai­mon to the nutty idea of buy­ing the most ad­vanced air­lin­ers in the world. But those planes have to be filled. Mai­mon ne­glected mar­ket­ing. El Al one day dis­cov­ered that on the route to Hong Kong, on which it was for­merly the sole air­line, it now has an ex­cel­lent com­peti­tor tak­ing away all of its pas­sen­gers. Min­is­ters Is­rael Katz [trans­porta­tion] and Yariv Levin [tourism] are com­pet­ing to see who can bring an­other air­line to Is­rael.

“In ad­di­tion, air­lines are also strength­en­ing their di­rect sales through gi­ant com­pa­nies Ex­pe­dia and Price­line, and El Al sim­ply isn’t there. The com­pany needs a CEO who knows how to read the map and in­vest in the right mar­ket­ing in­stru­ments.”

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