El Al seeks to acquire Isracard as war-driven monopoly boosts profits

El Al Israel Airlines has made a bold move by offering to acquire Isracard, one of Israel’s largest credit card companies, at a valuation of NIS 3.1 billion (US$ 806 M).

This acquisition aligns strategically with El Al’s frequent flyer program, which boasts 3.1 million members. The acquisition would complement its Fly Card credit card, which already has 414,000 members.

El Al’s stock price has soared by 173% over the past year, benefiting from the current geopolitical situation. Amid the ongoing war between Israel and Hamas, many foreign airlines have canceled their flights to Israel. As a result, El Al has enjoyed a monopoly on many key routes, particularly to the United States and Europe.

This monopoly has allowed the airline to raise ticket prices significantly, especially on high-demand routes, creating record profits in the second quarter of 2024. El Al’s position as the primary airline servicing these routes has given it unparalleled control over pricing during a period of limited competition.

From Near Bankruptcy to Financial Recovery

El Al was on the verge of bankruptcy just a few years ago, especially after the Covid-19 pandemic severely impacted the aviation industry. However, the airline has experienced a dramatic financial recovery, boosted not only by the post-pandemic travel surge but also by the current conflict with Hamas. The absence of foreign competition has allowed El Al to capitalize on the growing demand for travel while significantly raising ticket prices.

Despite the airline’s improved financial standing, the Israeli government has made efforts to convince El Al to lower its exorbitant ticket prices, which have been met with little success. The airline has maintained its pricing strategy, leveraging the lack of competition to maximize revenue during this period.

In acquiring Isracard, El Al seeks to expand its reach beyond the aviation sector and further strengthen its relationship with customers through financial services, creating a diversified business model that could enhance long-term profitability.

This strategic acquisition could mark a new chapter in El Al's business operations, allowing it to combine its retail activities with a financial service provider, benefiting both the airline and its loyal customers.