Boeing yesterday announced it was doing a deal with El Al for 15 787s plus 13 options. This would be the largest order ever from the airline.
No specific model has been announced but it is to be a mix of the -8 and -9. El Al has some unique requirements. When the airline ordered 737NGs their focus was range. This is an airline with distinct range requirements – they tend to prioritize on non-stop capabilities.
El Al says the 787s will replace its 747-400 and 767 over the next five years for medium-long haul flights (New York, Boston, Toronto, Bangkok, Beijing, Mumbai, South Africa). The -9 will replace the 747-400s and the -8 will replace the 767s. El Al seems to be of the “right-sizing” philosophy.
Almost certainly the cut back in capacity between JFK and TLV by removing the 747-400s will make competitors Delta and United happy. Daily traffic is around 2,000 people per day each way. Fares will go up.
Although no deal has been signed – El Al and Boeing are in “exclusive talks” – there is some interesting backdrop to this story. Airbus has been trying to break the airline’s fifty year relationship with Boeing. (Airbus had sold A320s to Irsair, a small Israeli airline.) We have heard how Airbus thinks the airline would be able to use an A380 between JFK and TLV. Its not an outlandish idea in traffic terms, since direct competition fly two daily 777-200s and El Al has a 747-400 and a 777-200 six days per week. For El Al the A380 might be more risk than they can digest.
Airbus might have been offered a very aggressive deal on A330neo for this order. However, there are complications for Airbus doing business with Israel. Offsets are an issue. Even though El Al is a public company with no state control, it helps if Airbus can offer some sort of offsets. This is common practice. But if Airbus were to start using, for example, Israeli-made parts some other (much bigger) airlines might be unhappy. Boeing has no problem with this because of its large involvement with the Israel air force making offsets easier to work out.
The outcome is that El Al buys Boeing exclusively. Knowing that El Al is not going to speak with Airbus means the airline probably does not get the best pricing. But then the offsets kick in and somehow it works out.
Regarding engines, El Al uses Rolls on its 777s. Unless GE works some magic, we suspect the engines for the 787s will be Rolls. Magic might include offering favorable leases on 787s as El Al will be leasing some 787s. Offsets come in all flavors.
