El Al's CEO David Maimon and Its CFO, Dganit Palti, Presented the Financial Statements for the Fourt

Mr. David Maimon, El Al's CEO, stated: "The results of 2014 reflect the effects of the 'Protective Edge' Operation which caused a significant decline in tourism and harm to El Al's profits. In the second half of 2014 there was a decline in incoming tourism to Israel by the considerable rate of 20%. In addition the increasing competition at Ben Gurion Airport resulted in an erosion in flight prices, and as a result, together with the increase in operations and increase in market share, there was also an increase in expenses which harmed profit margins.

"2014 was a challenging year. Despite the negative effects of the 'Protective Edge' Operation and increasing competition at Ben Gurion Airport, El Al succeeded in increasing its market share and maintaining high cash flows from operating activities, which reached 157 million dollars and an EBITDA of 107 million dollars."

"While coping with the security situation, El Al succeeded in meeting its business and marketing targets. This year we successfully started operating El Al's low cost flights - UP, as a response to the increased competition. In addition we launched the FLYCARD and FLYCARD premium credit cards which were taken up by 70 thousand customers in only a few months. In addition El Al continued equipping itself with new 737-900 narrow-body aircraft. With this renewal and expansion of the Company's routes we announced the opening of a new direct line to Boston and a new cooperation agreement (share code) signed with JetBlue, which will enable our customers to fly to a wide range of destinations in the U.S. with high availability and convenient connections."

Ms. Dganit Palti, CFO, stated: "2014 was a challenging year. Despite the negative effects of the 'Protective Edge' Operation and increasing competition at Ben Gurion Airport, El Al succeeded in increasing its market share and maintaining high cash flows from operating activities, which reached 157 million dollars and an EBITDA of 107 million dollars.

"Together with this, the financial results were also affected by an accounting recording from hedging transactions that the Company made, due to the sharp decline in fuel prices and an increase in the rate of exchange of the dollar against the shekel in the second half of 2014. These changes were expressed in the negative accounting effect of 94 million dollars. Of this, 52 million dollars affected the results and the balance affected shareholders' equity. Nevertheless, the advantage of low fuel prices, for which the change in value of the transactions were recorded to the statement of income during the year of report, will be expressed in 2015 when the Company consumes the fuel.

"El Al continued to equip itself in 2014 with new aircraft, according to its long-term equipment policy, and this year we invested 176 million dollars in the acquisition of equipment and at the same time repaid loans of 98 million dollars and received new loans of a similar amount."

The main results of 2014

Operating revenues in the present year decreased to 2,081 million dollars, compared to 2,103 million dollars in 2013, a decline of 1%. Passenger Revenues declined by 0.9%, mainly as a result of a decline in the passenger-km yield, the effect of the Protective Edge Operation and competition. A positive effect on revenues was the increase in the number of passengers flown as a result of the increase in aircraft and more frequent flights. Revenues from cargo transport declined by 1.7%, mainly as a result of a decline in ton-km. yield after setting off the increase in the number of ton-kms. flown. In other revenues there was a decrease of 3.4% compared with 2013, mainly as a result of a decline in revenues from providing maintenance services to outside parties.

Operating expenses in 2014 aggregated 1,791 million dollars, compared to 1,753 million dollars in 2013, an increase of 2%, primarily as a result of an increase in operations, mainly for fuel expenses, levies and maintenance, and from an increase in depreciation due to the addition of aircraft. The rate of operating expenses to turnover increased to 86.1% in 2014, compared to 83.3% in 2013.

Operating salary expenses increased in 2014 compared to 2013 mainly due to the increase in the Company's operations, after setting off the effect of the devaluation of the shekel against the dollar on the Company's liabilities for employee benefits.

Security expenses - as the Company reported in the past, during 2014 the State's participation in security expenses was 97.5% and therefore a decline in the Company's share of these expenses was recorded.

The Company's expenses for jet fuel increased by 1.8% compared to 2013, and the rate on turnover increased to 33.8% compared to 32.9% in 2013. During the period of report a decline was recorded of 8% in the prices of jet fuel, but on the other hand, according to the Company's hedging policy, this resulted in an increase in the effective price. Total hedging payments in 2014 aggregated 21.7 million dollars (a cash flow expense) and in addition the company recorded an expense (accounting) of 20.9 million dollars due to a change in fair value, while in the previous year the Company in practice received hedging refunds of 6.1 million dollars and recorded an expense of 2.2 million dollars due to the change in fair value. The hedging payments and the increase in operations setoff the effect of the decline in fuel prices.

Gross profit during the present year aggregated 290.3 million dollars (a rate of 13.9% on turnover), a decline of 17% compared to 350 million dollars in 2013 (a rate of 16.6% on turnover).

Selling expenses aggregated 201 million dollars in 2014, compared to 204.7 million dollars in 2013, a decline of 2%. The total rate of selling expenses on turnover in 2014 aggregated 9.7%, similar to the previous year.

General and administrative expenses in 2014 aggregated 104.4 million dollars, compared to 106 million dollars in 2013, a decline of 1%, and this mainly due to decline in salary expenses. The rate of expenses on turnover reached 5.0%, similar to the previous year.

The Company's loss from operations in 2014 aggregated 3.7 million dollars (a negative rate of 0.2% on turnover), compared to operating income of 40 million dollars in 2013 (1.9% on turnover).

Net financing expenses in the present year aggregated 35.7 million dollars, compared to 0.8 million dollars in 2013, mainly as a result of the high hedging expenses of the rates of exchange recorded this year, compared to income from hedging recorded in 2013.

Net loss in 2014 aggregated 28 million dollars, compared to net income of 26.7 million dollars, in 2013.

Additional data

Cash flows from operating activities in 2014 aggregated 157.6 million dollars compared to cash flows from operating activities in 2013 of 185 million dollars.
El Al's EBITDA in 2014 aggregated 107 million dollars, compared to 144 million dollars in 2013.

Correct as of December 31, 2014, the balances of the Company's cash, cash equivalents and short-term deposits aggregated 98 million dollars. In 2014 the Company invested in fixed and other assets 176 million dollars, mainly payments for new 737-900 aircraft and the purchase of spare parts. In addition, the Company repaid loans of 98 million dollars and received a net loan of 93 million dollars for financing the new aircraft.

The Company's shareholders' equity correct as at December 31, 2014, aggregated 111.4 million dollars, compared to 183.5 million dollars on December 31, 2013. The change in shareholders' equity is a result of the loss in 2014 and a decline in the capital reserve for hedging transactions as a result of a decline in the fair value of these transactions.

The main results during the fourth quarter of 2014:

Revenues in the fourth quarter of 2014 aggregated 493 million dollars, compared to 499 million dollars during the equivalent quarter in the previous year, a decline of 1.2% compared to 2013.

Operating expenses aggregated 433 million dollars (a rate of 87.9% on turnover) compared to 429.7 million dollars during the equivalent quarter in the previous year (a rate of 86.1% on turnover), an increase of 0.8%.

Gross profit aggregated 59.8 million dollars (a rate of 12.1% on turnover), compared to 69.3 million dollars in the equivalent period in the previous year (a rate of 13.9% on turnover).

Loss from operations in the fourth quarter of 2014 aggregated 5.4 million dollars, compared to a loss from operations of 8.3 million dollars during the equivalent quarter in the previous year.

The loss for the quarter aggregated 14.8 million dollars, compared to 3.7 million dollars during the equivalent quarter in the previous year.