EL Al reports 2Q2012 financial highlights

A decrease of 68% in El Al's losses. The loss in the second quarter dropped to $6.2 million compared to a loss of about $19.7 million in the parallel quarter of 2011

Operating expenses during this quarter dropped by about 7% and totaled $438.9 million, compared to $470.2 million in the parallel quarter last year

The company's revenues totaled about $516.8 million, compared to $530.5 million in the parallel quarter of 2011

The ratio of gross profits on turnover rose from 11.4% to 15.1% and totaled about $77.9 million, compared to $60.3 million in the parallel quarter of 2011

Cash flow resulting from the Company's

Elyezer Shkedy, El Al (TASE:ELAL) President and CEO: "During the second quarter El Al successfully faced the challenges of a world economy in crisis. The crisis also affected the aviation sector, resulting in the collapse of several European airlines, including SpanAir, Malev and WindJet. In addition, we dealt with the realities of the complex geopolitical situation in the Middle East. The Company continues to face the issues of civil aviation in Category 2, which places us in a disadvantaged position in the world aviation environment. Yet in spite of all this, we are presenting financial results that show ongoing increased efficiency and careful management control over expenditures, thus reducing potential losses.

"During the first half of 2012, the Company continued to take steps towards increased efficiency so as to adjust itself to the reality of the business climate. We succeeded in maintaining lower expenditures. The number of staff positions in the Company decreased by 168 on average for the second quarter, compared to the parallel quarter of 2011. The Company's operations management brought about a reduction in the volume of operating expenses for the Company, of about 7% compared to the parallel quarter of 2011.

"Over recent months El Al had to face the process of a new "open skies" policy. El Al has no objection to an appropriate and suitable agreement. All we ask that we be allowed to compete on an equal footing, so that the competition is fair and equal. At this time, fair and equitable conditions for competition for everyone do not exist.

"The result of the Company's strategic policy to develop and institutionalize direct distribution and marketing channels has seen a significant increase of sales by internet and through the Call Center - about 17.5%.

"Our program for re-equipping and reducing the age of our fleet continues for the long term. The Company has purchased two additional narrow-bodied 737-900s from the Boeing Company (for a total of 6 aircraft) and we are negotiating now for the purchase of wide-body aircraft as well.

"We are continuing with our medium- and long-term business strategy which will reflect the Company's targets and policies for the coming years, always taking care to match the existing circumstances to world market developments in international civil aviation. At this time the Company pursues its plans and we are preparing a detailed working map.

"I would like to thank all the Company people - on the ground, in the air, in Israel and abroad - determined and devoted to overcome the complex challenges we had to face this past quarter. We are committed to continue; to provide services and products of only the highest standards for our customers; to continue in our endeavors and to successfully meet the challenging market conditions."

Nissim Malki CFO and Vice President Finance: "In spite of the challenging business conditions, we recorded a significant increase in gross profits during the quarter under review: $77.9 million compared to $60.3 million in the parallel quarter of 2011, while the ratio over turnover rose from 11.4% to 15.1%.

"We reduced our operating expenses, while adjusting them to the volume of activity, by about 7%; the total was $438.9 million compared to $470.2 million in the parallel quarter of 2011. We have continued with the Company's increased efficiency program; during the second quarter of 2012 we created a positive cash flow which totaled $14.1 million and about $79.2 million in the first half-year of 2012.

"The EBITDA in this quarter totaled about $29.5 million, compared to $3.9 million in the parallel quarter of 2011.

"We made the necessary investments in order to implement our policy of reducing the age of the Company's aircraft fleet. During the first half of 2012 the Company invested about $41 million in fixed assets, and signed a contract to purchase two Boeing aircraft in accordance with our multi-annual re-equipment program. The Company also repaid current debts amounting to about $56 million, and received loans of $16 million, mainly to finance aircraft purchases."

El Al Israel Airlines today published the financial reports summing up the results of operations in the first half of 2012, and for the second quarter of 2012. The following are the highlights:

Results for the second quarter of 2012:

• Revenues for the present quarter totaled $516.8 million, compared to $530.5 million in the parallel period last year, a drop of about 3%. Revenues from passengers dropped by about 1%, the result of the decrease in the number of passengers and the devaluation of the euro vis-à-vis the dollar. This was offset by the increase in passenger-kilometers. Cargo revenues also dropped, by about 7.2% and totaled $47.6 million, compared to $53.1 million in the parallel quarter of 2011, as a result of the reduction in ton-kilometers flown.
• Operating expenses in the quarter under review dropped by about 7% to about $438.9 million, compared to $470.2 million in the parallel quarter last year. The ratio of operating expenses on turnover dropped from about 88.6% during the second quarter of 2011 to about 84.9% in the current resulted quarter. Most of the reduction in operating expenses came from the reduction in activities, the reduction in cost of salaries, the changes in the dollar-euro exchange rates and the increase in the State of Israel's participation in security costs in accordance with the Government's decision. Cost of salaries in the second quarter of 2012 was reduced in comparison to in the parallel quarter of 2011. Most of that reduction stemmed from the devaluation of the shekel in vis-à-vis to the dollar, as well as the reduction in the average number of employees - the result of implementing innovative efficiency programs. During the second quarter, the average number of Company employees, permanent and temporary, was 5,938, compared to 6,106 during the parallel quarter of 2011.
• During the present quarter, the Company's costs for aviation fuel grew by about $2.9 million compared to in the parallel quarter of 2011, and increase of about 1.6%. Market prices of aviation fuel dropped during the reported quarter by about 6% on average, compared to in the parallel quarter of 2011. During this quarter the Company registered hedging costs for aviation fuel totaling $1.8 million, which were charged to the profit & loss reports. (In the parallel quarter of 2011 the Company reported hedging returns of a total of $20.9 million.)
• Gross profits for the quarter totaled $75.8 million (a ratio of about 14.7% on turnover), compared to $60.3 million in the parallel quarter last year (a ratio of 11.4% on turnover).
• Operating profits totaled $2.2 million, compared to an operating loss of $23.2 million in the parallel quarter of last year.
• Net losses for the second quarter of 2012 totaled $6.2 million, compared to a loss of $19.7 million in the parallel quarter of 2011.
• Cash flow from regular activities during the second quarter of 2012 totaled $14.1 million. Cash flow for the first half of the year totaled about $79.2 million.
• El Al's EBITDA for the second quarter of 2012 totaled about $29.5 million, compared to $3.9 million in the parallel quarter of 2011
• Load factor rose during the quarter to about 82.3%, compared to 81.1% on the other scheduled airlines operating at Ben Gurion Airport.

Results of the first half of 2012:

• Revenues for the first half of 2012 totaled $945.9 million, compared to $955.7 million in the first half of 2012, a reduction of about 1%.
• Operating expenses for the first half of 2012 totaled about $827.7 million, compared to $873.6 million in the parallel quarter of 2011, a drop of about 5.3%. The change resulted mainly from the reduction in cost of salaries, as well as from a reduction in activities during the reported period, and from the devaluation of the shekel vis-à-vis the dollar compared to the parallel period of 2011.
• Gross profits for the first half of 2012 grew by 44% to about $118.3 million, compared to $82.1 million in the parallel quarter of 2011.
• Losses from operations during the first half of 2012 totaled about $21.9 million, compared to losses from operations of $76.7 million during the first half of 2011.
• The net loss for the first half of 2012 totaled $29.7 million, compared to a loss of $62.6 million in the parallel quarter of 2011.
• El Al's EBITDA for the first half of the year grew by $32.6 million, compared to the negative EBITDA totaling about $23.2 million in the parallel quarter of 2011.

Additional data

• As at the 30^th June 2012 the Company's cash balances, cash equivalents and short-term deposits totaled $109.5 million. It should be noted that in the first half of 2012 the Company invested about $41 million in fixed assets (in accordance with the Company's multi-annual investment program) and repaid current loans to the value of about $56 million. The Company also received loans of about $16 million, for the purchase of fixed assets.
• The Company's capital as at the 30^th June 2012 amounted at $112 million. During the first half of the year the equity was influenced mainly by the losses for the period and by the reduction in the capital fund for cash flow hedging.

About El Al

El Al Israel Airlines is Israel's national carrier. In 2011 El Al's revenues totaled about $2.1 billion. The airline flew about 2 million passengers in 2011. El Al serves about 38 destinations directly and many other destinations around the globe, through cooperation agreements with other airlines. The Company operates 39 aircraft, 24 of which are self-owned. El Al is Israel's leading cargo carrier. www.elal.co.il

Important financial and operational topics from the 2nd quarter 2012.

Profit & Loss Report (in millions of dollars)

	April-June 2012		April-June 2011		Change
	Thousands of Dollars	% on Turnover	Thousands of Dollars	% on Turnover	Thousands of Dollars	% Change
Operating Revenues	516,849	100%	530,499	100%	(13,650)	(3%)
Operating Expenditure	(438,924)	(84.9%)	(470,156)	(88.6%)	31,232	(7%)
Gross Profits	77,925	15.1%	60,343	11.4%	17,582	29%
Cost of Sales	(53,119)	(10.3%)	(55,931)	(10.5%)	2,812	(5%)
Managerial & General Expenses	(22,907)	(4.4%)	(24,940)	(4.7%)	2,033	(8%)
Other Net Revenues (Expenses)	254	0.0%	(2,643)	(0.5%)	2,897
Profit (loss) on operations before financing costs	2,153	(0.4%)	(23,171)	(4.4%)	23,219
Financing Revenues/ Costs	(10.4)	(2.0%)	(0.5)	(0.1%)	(10.9)
Company's Share in Net Pre-Tax Profits, incl. Subsidiaries	301	(0.1%)	145	0.0%	156	108%
Pre-Tax Loss on Revenues	(7,902)	(1.5%)	(22,512)	(4.2%)	14,610	(65.5%)
Tax on Revenues	1,669	0.3%	2,804	0.5%	(1,135)	(40%)
Loss for this Quarter	(6,233)	(1.2%)	(19,708)	(3.7%)	13,475	(68%)

	January-June 2012		January-June 2011		Change
	Thousands of Dollars	% on Turnover	Thousands of Dollars	% on Turnover	Thousands of Dollars	% Change
Operating Revenues	945,948	100%	955,673	100%	(9,725)	(1%)
Operating Expenditure	(827,660)	(87.7%)	(873,556)	(91.4%)	45,896	(5%)
Gross Profits	118,288	12.5%	82,117	8.6%	36,171	44 %
Cost of Sales	(101,520)	(10.8%)	(100,874)	(10.6%)	(646)	(1%)
Managerial & General Expenses	(47,615)	(5.0%)	(49,264)	(5.2%)	1,649	(3%)
Other Net Revenues (Expenses)	8,990	1.0%	(8,655)	(0.9%)	17,645
Profit (loss) on operations before financing costs	(21,857)	(2.3%)	(76,676)	(8.0%)	54,819	71 %
Financing Costs (Revenues)	(18.5)	(2.0%)	(1.7)	(0.2%)	(20.2)
Company's Share in Net Pre-Tax Profits, incl. Subsidiaries	1,212	0.1%	880	0.1%	332	38%
Pre-Tax Profit (Loss) on Revenues	(39,152)	(4.1%)	(74,059)	(7.7%)	34,907	(47%)
Tax on Revenues	9,445	1.0%	11,415	1.2%	(1,970)	(17%)
Loss for this Quarter	(29,707)	(3.1%)	(62,644)	(6.6%)	32,937	(53%)

Integrated Report on the Financial Affairs
(Millions of dollars)
Revenues			Liabilities
	30/6/2012	31/12/2011		30/6/2012	31/12/2011
Current assets	384	320	Current liabilities	834	715
Fixed assets	1,230	1,264	Long-term liabilities	668	709
			Equity	112	160
Totals	1,614	1,584	Totals	1,614	1,584

Operational Statistics

	April-June	April-June	Change
	2012	2011
Thousands of Scheduled & Charter Passenger Segments (paying passengers)	1,074	1,067	1%
Millions of Revenue Passenger-Kilometers (scheduled)	4,456	4,485	(1%)
Millions of Available Seat-Kilometers (scheduled)	5,411	5,530	(2%)
Load Factors (scheduled) in %	82.3%	81.1%	2%
Overall market share (scheduled & charter) in %	33.7%	33.5%	1%
Thousands of Flown Cargo-Tons	23.4	24.2	(3%)
Millions of Revenue Cargo Ton-Kilometers (RTK)	119.2	129.4	(8%)
Thousands of weighted flying hours (incl. leased equipment) - in thousands	39.4	41.5	(5%)
Employees - Average personnel years (only the Company)
Permanent staff	3,829	3,858	(1%)
Temporary staff	2,109	2,248	(6%)
Totals	5,938	6,106	(3%)

	Jan-June	Jan-June	Change
	2012	2011
Thousands of Scheduled & Charter Passenger Segments (paying passengers)	1,944	1,956	(1%)
Millions of Revenue Passenger-Kilometers (scheduled)	8,215	8,217	(0%)
Millions of Available Seat-Kilometers (scheduled)	10,038	10,390	(3%)
Load Factors (scheduled) in %	81.8%	79.1%	3%
Overall market share (scheduled & charter) in %	34.9%	35.4%	(1%)
Thousands of Flown Cargo-Tons	48.4	53.2	(9%)
Millions of Revenue Cargo Ton-Kilometers (RTK)	252.2	281.3	(10%)
Thousands of weighted flying hours (incl. leased equipment) - in thousands	74.7	80.7	(7%)
Employees - Average personnel years (only the Company)
Permanent staff	3,838	3,865	(1%)
Temporary staff	2,010	2,160	(7%)
Totals	5,848	6,025	(3%)

Refer to full documentation in attachments box, located at the top left, below the headline.