Earlier this month an American Airlines plane touched down in Israel for the first time in five years. The world's largest airline, with a fleet of 1,400 planes, had inaugurated the New York (JFK) - Tel Aviv route. But only five days later flights were suspended due to the rockets fired at Israel from Gaza, although services have since been resumed. In two weeks American Airlines will also launch its Miami - Tel Aviv route, and later in the year its Dallas - Tel Aviv route.
Back in 2016, American Airlines halted its Philadelphia - Tel Aviv flights - a route it had acquired after its merger with US Airways in 2013. But American Airlines managing director EMEA sales Tom Lattig has told "Globes" that the US carrier won't be abandoning the Israeli market again.
"We stopped at the time due to considerations about profitability," Lattig said. "It wasn't something that we planned to do in advance. There's no market in which you build a route and plan to cancel it. It was an unprofitable route and we needed to make a decision. I can promise you now, looking ahead long-term that we have no intention of halting the routes to Israel. They have greeted us with open arms and these are expected to be very successful routes."
Lattig added, "The original plan was to launch just the Dallas route - a route that no other airline flies to from Tel Aviv."
Lattig even visited Israel last year on this matter and then decided not to suffice with just one route. "Israel has always been a market that we wanted and the virus has given us the opportunity including also launching a route to Miami, which no other US airline operates from Tel Aviv."
"The fact that we also have added both New York and Miami is connected to the virus, which has changed the thinking of international airlines, especially when it comes to transatlantic flights and from Miami and Dallas, we are offering connection flights to Mexico, the Caribbean and Latin American destinations. We know that Israelis like to travel to these places after the army and also for cruises."
But still this is a crowded market. Currently on the Ben Gurion departure board there are nine flights to the US operated by El Al, Delta and United within just a few hours and that's during the Covid crisis when foreign citizens can't get into Israel.
"True there is competition, but the rate of bookings has already risen above our expectations, and it's an open market and demand is rising, mainly to New York and Miami in both directions. We expect that when the restrictions are lifted, demand will rise. For flights to the US, there is year-round demand and we have already seen that when countries lift restrictions, then demand immediately jumped. This will also happen in Israel."
In normal times, business passengers make up about half of global business for the airlines, in terms of money. But today Lattig describes this segment as, "the weakest." He continued, "The biggest market at this stage is passengers flying to visit family and the second layer is of tourists on vacation and as the summer approaches, we see large growth regarding cruise tourism."
American Airlines has also announced an interesting cooperation with US low-cost carrier JetBlue, which is based at JFK and offers domestic US flights. This cooperation was the catalyst for American Airlines to launch Tel Aviv - New York flights.
Was this cooperation a result of Covid which required creative measures?
"In the US, there is huge competition with the big players and in this way we can offer flights to 50 new destinations from New York and from Boston. These are destinations that American Airlines does not reach and it's significant but would it have happened if there had not been Covid? We sought ways to strengthen and be competitive, especially in New York and Boston, where operations are limited, because there is a very restricted supply of slots. So the only major way to significantly grow was to connect up to somebody, or hope that our rivals would move aside and allow us to buy one of them. We chose to link up with JetBlue."
American Airlines has 10 hubs but New York is not one of them.
We think of New York as a hub. We have committed to the US administration to increase our operations there and that will be done though our cooperation with JetBlue. The route to Tel Aviv is also part of our commitment to increase the scale of activities in New York. As well as Tel Aviv, we have launched routes from JFK to Delhi, Medellin in Colombia, and Athens."
Lattig stresses that American Airways is also operating cargo services from New York to Tel Aviv and Athens.
Almost back to normal
The airline industry is recovering faster than expected thanks to the vaccination rollout.
He said, "As the pace of vaccinations progresses in the US, the pace of recovery goes accordingly. What interests the airlines today is revenue and returns. We are close to 90% of internal US operations compared with before the virus. Even before the pandemic, US domestic flights represented half of our operations. On international routes, flights to nearby destinations like Mexico or the Caribbean reflect in my estimation, about 80% of previous operations."
American Airlines competing on the Tel Aviv - New York route with El Al, United and Delta who have all announced that they are expanding operations to the US. All three rivals have alliances with other major airlines as well as loyal customers who are members of their frequent flyer clubs. But American Airlines is a member of the OneWorld Alliance, which is significant because passengers are loyal to the airlines that give the best air miles incentives for future use.
When Virgin Atlantic launched Israel operations, they appeared directly to members of El Al frequent flyer club and offered to provide the air miles that new customers had already accumulated before moving. Will American Airlines make the same offer?
"We know that our loyalty program is not the world's largest but it is one of the world's three largest. We will knpow how to bring customers over to us so that they keep their status and the miles that they have accumulated."
It appears that American Airlines understands the Israel-US flights market and where the customers are to be found. Despite jet-lag, soon after the carrier's senior executives landed in Israel, they were already meeting with travel agents and consultants from the haredi (ultra-orthodox) sector from Hul Mehudar to learn about the community's needs.
American Airlines has even appointed a "Jewish Desk Head" to implement needs and has committed to putting some Hebrew speaking cabin staff on each flight. The carrier will also try and adapt times to suit Shabbat observes and will provide koshe lemehadrin food as well as kosher food in airport lobbies.
David Rubinstein, one of the heads of Hul Mehudar said, "We left the meeting feeling that they are listening to our community and our needs." Hul Mehudar is used to being courted and newly appointed El Al CEO Avigal Soreq set up a meeting with them on one of his first days in the job. More than one third of passengers on Tel Aviv - New York flights come from the haredi community.
In addition to Delta, United and El Al, you are also competing with the likes of Turkish Airlines and Aeroflot who offer indirect connection flights.
"We believe that at the current time passengers will prefer direct flights over spending time in another airport on the way to their destination. If they want to stop off at an airport on the way, then we have an agreement with British Airways and Iberia, and we know here too how to offer a competitive product. But we will bring more passengers on direct flights."
WQe have been talking about the potential for flying Israelis abroad but what about incoming tourism? In 2019, 4.5 million tourists including 1 million from the US, visited Israel - the country's biggest single source of tourists and these numbers can grow.
"After people were imprisoned in their homes for a year, we identify huge demand for flights. Because of the high rate of vaccinations, Israel is an attractive place for tourists and as soon as it opens up, we will see large traffic from the US. Add to the equation that people are preparing to spend more on travel, after their expenses were canceled in the past year, and you will see growth in demand."
And the demand will influence the fare? In that equation prices will become more expensive.
"In the short term prices will be more attractive but later on they will rise. Ultimately, the airlines have to be profitable and pricing is part of that. The companies will look for every possible profit and you have to take into account that the price of fuel will rise as activities increase. The price will have to adapt itself to demand but also to the profit line."
"The entire topic of occupancy on flights is challenging. Many of the planes around the world are still grounded. I believe that by the end of the summer all of our planes will be back in the air, including the 737 Max, which already began operating at the start of the year (The Boeing 737 Max was grounded in March 2019 following the two accidents).
Staying competitive
The entry of American Airlines into the Israeli market has sharpened competition, and by last month it was already possible to find direct flights to the US, even for the summer months, for $500-600, and even less.
You advertised return flights for $360 and then you said it was a mistake. Hundreds of people managed to purchase tickets at that price. Was it really a mistake?
"We will always offer competitive prices on all our markets, because competition is the name of the game. The $360 fares really were a mistake so it was only valid for a limited time but we honored the tickets of everybody who was quick enough to buy it. Let's hope we don't make more mistakes. The price level reflects demand."
Has coronavirus led to a renewed need for luxury class on flights?
"Even before Covid we saw demand for premium economy class and on long-haul flights this is a strong product and not only for businesspeople but also vacationers. Demand for premium class has been stable since we launched it and during the pandemic it rose because people preferred to pay more and keep their distance from other passengers. We will adapt ourselves with products that also serve our profitability. Although the business segment is recovering more slowly, as employees begin to return to their offices, it also means that they will restart business travel."
Published by Globes, Israel business news - en.globes.co.il - on May 27, 2021
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