El Al in 2025: The Cash Is Still Flowing, but 2026 Is Already a Normalization Test

Getting to Know the Company

El Al can still be screened as a wartime airline that benefited from an extreme shortage of flights to and from Israel. That is true, but only partly. In practice, this is a three-layer economic platform: an international passenger network, a cargo activity that uses both passenger-belly capacity and a dedicated freighter, and a frequent-flyer club that now operates as a loyalty, data and cash engine in its own right. In 2025 the company posted $3.476 billion of revenue, carried 6.785 million paying passengers, employed 5,904 active workers, and generated roughly $589 thousand of revenue per employee. By route geography, America contributed $1.388 billion, Europe $1.534 billion, and Asia and Africa $451.9 million of passenger and cargo revenue.

The right screen starts with what is clearly working now. Demand remained very strong, annual load factor held at 93.8%, cash and available liquidity reached $1.961 billion, and the frequent-flyer club already had 3.552 million members and 518 thousand Flycard credit cards. The market is also no longer reading El Al as a survival story: in early April 2026 market cap stood at about NIS 8.4 billion, daily turnover was nearly NIS 29.2 million, and short float had fallen to just 1.36%.

But a quick read can still mislead. Revenue rose only 1.3%, EBITDAR fell 14.8% to $947.4 million, operating profit fell 28.8%, cargo weakened, and the fourth quarter already looked materially softer than the comparable quarter. So 2025 is not simply "another record year". It is the year El Al moved from the extreme shortage of 2024 into a first stage of normalization, while still making a great deal of money, but on a less clean base.

That is also the active bottleneck for 2026. The issue is no longer survival, and not even headline liquidity. The question is whether El Al can hold seat yield and healthy cash generation as foreign airlines return gradually, cargo normalizes, and the company’s cost base has already moved up materially. This is not a breakout year. It is a transition and proof year.

The Economic Map

Events and Triggers

Phoenix increased its stake in the club, and the meaning cuts both ways

First trigger: In February 2026 Phoenix exercised the remainder of its option and acquired another 5.1% of the club subsidiary. El Al received about $7.7 million, and Phoenix’s stake rose to 25%. This matters because it validates the value of the club and adds some cash. But it also reminds investors that this engine no longer sits fully with El Al’s ordinary shareholders.

The economic implication is deeper than it looks at first glance. The club subsidiary ended 2025 with $92.7 million of revenue, $86.1 million of EBITDA, $94.4 million of operating profit, $52.5 million of net income, and $156.3 million of operating cash flow. Those are very strong numbers, but they sit at the subsidiary layer with minorities, and not every dollar there is automatically a dollar that belongs to El Al’s common shareholders.

The CEO transition arrives exactly as the company enters a harder phase

Second trigger: Dina Ben Tal Ganancia left the CEO role on December 31, 2025, and Levy Halevy took over on January 21, 2026. This is not a routine management change. A new CEO is entering a company that no longer benefits from the same extreme shortage conditions of 2024, but still has a strong balance sheet, a strong brand and a loyal customer base. In other words, the new CEO’s real test is not stabilizing a company in crisis, but managing normalization without giving back the advantages of the exceptional period.

The dividend and the warrants mark a move from rescue mode to capital allocation

Third trigger: In January 2026 the company paid a NIS 323 million dividend, about $102 million, and the dividend also reduced the adjusted exercise price of Series 3 warrants to NIS 5.5201. During 2025, 57.3 million Series 3 warrants were exercised and brought in $88.7 million. After the balance-sheet date, another 12.7 million warrants were exercised and added $19.6 million.

The signal is clear. El Al is no longer operating under pure survival discipline. It has moved back into capital returns. But there is a second side to that move: the dilution layer has not disappeared, and any discussion of dividends, warrant exercises and per-share value has to be read through a larger share base than the one the company had at the start of 2025.

Legal and regulatory provisions are now part of the story, not a footnote

Fourth trigger: Legal provisions jumped to $64.4 million at the end of 2025 from $13.4 million a year earlier. After the balance-sheet date, two major Competition Authority notices were added: a possible penalty of about NIS 121.8 million related to inbound and outbound ticket prices during October 7, 2023 through the end of May 2024, and a further possible NIS 110 million penalty plus about NIS 1 million on two officers around the hangar market, together with a possible monopoly declaration in that market.

This is no longer theoretical risk language. The company itself recorded a provision around these notices. That means 2026 investors will have to distinguish between exceptional profits generated by a shortage period and profits that can still hold when the competition and regulatory layer becomes more aggressive.

Efficiency, Profitability and Competition

The 2025 story is not that revenue stayed strong. That part is obvious. The real story is that margin eroded despite very high demand. Operationally, El Al did not lose passengers. It lost part of its profit per unit of capacity, mainly because of higher costs, weaker cargo contribution, and a fourth quarter that already looked much less exceptional.

What held revenue up

Passenger revenue increased by $78.8 million, 2.6%, mainly because ASK rose 2.9%. But RRPK barely changed, 11.70 cents versus 11.74 cents, and RASK slipped to 10.97 from 11.00 cents. That is an important nuance. El Al still benefited from a strong demand backdrop, but the revenue increase did not come from pricing power that kept getting stronger. It came mainly from capacity growth. At the same time, cargo revenue fell by $53.8 million, 20.2%, while ancillary revenue rose by $18.9 million, mainly because the loyalty-program component jumped 47.8%.

So the revenue engines of 2025 are already different from those of 2024. Passenger traffic held, the club strengthened, but cargo, which had been one of the cleaner earnings engines in the shortage period, already started moving backward.

Where margin actually eroded

Costs moved higher across most major lines. Wage expense jumped by $122.2 million to $855.0 million. Airport fees and services rose by $31.8 million. Maintenance rose by $21.8 million. Food, passenger service and other operating costs rose by $34.8 million. Rentals, mainly wet leases, rose by $23.4 million. IT and headquarters costs rose by $9.2 million. Other expenses, net, also swung to a negative $24.6 million, among other things because of CORSIA and legal matters.

The result at unit-economics level is very clear: TRASK fell to 12.06 cents from 12.25, while CASK rose to 10.07 cents from 9.51, and ex-fuel CASK rose to 8.04 from 7.37. Put simply, the spread between revenue per unit of capacity and cost per unit of capacity narrowed.

The fourth quarter already offered a 2026 preview

The fourth quarter may be the most important part of the report. Revenue stayed almost flat at $851.7 million, but EBITDAR fell to $198.8 million from $275.1 million, and net income dropped to $46.2 million from $129.6 million. Load factor fell to 92.7% from 96.2%. RASK fell 2.0%. TRASK fell 4.3%. Cargo tonnes fell 22.4%.

That is a key point because it shows the erosion is not explained only by the June shutdown. Even after operations resumed, the final quarter of the year already looked less exceptional, with more capacity, less cargo, and pricing that no longer compensated for the cost base as comfortably as before.

Competition returned before the market returned to full normal

Total market share fell to 37.4% from 47.5%, and in the fourth quarter to 32.5% from 52.4%. Regional shares tell the same story. In transatlantic routes, the El Al and Sun d’Or share fell to 70.6% from 90.7%. In Europe it fell to 35.6% from 44.5%. In the Middle East and Africa it fell to 7.5% from 11.1%. This happened before a full return to open skies.

This is the core of the story. The 2026 question is not whether foreign carriers will return. They already started returning. The question is whether El Al can hold much higher profitability even as share comes down, or whether the 2024 peak was really a one-off outcome of extreme scarcity.

Cash Flow, Debt and Capital Structure

Cash flow, two different pictures have to be kept separate

El Al is exactly the kind of case where normalized / maintenance cash generation should not be mixed up with all-in cash flexibility. The company presents free cash flow before tax and after debt service of $469.9 million, but that bridge is built on EBITDA of $847.7 million and CAPEX of $128.6 million, meaning investments the company defines as ongoing maintenance and replacement, engine overhauls, spare parts and IT spending. That is a useful metric, but it does not tell the full cash story.

On the normalized / maintenance cash generation view, the number is still strong. Even after $154.4 million of loan principal repayment, $104.9 million of lease principal repayment, and $63.0 million of interest payments, $469.9 million remained before tax. That helps explain why the company can talk about both dividends and growth.

But on the all-in cash flexibility view, the picture is broader. Actual investing cash flow reached $389.4 million, not $128.6 million. That number included $70.6 million used to buy aircraft and an engine that had previously been leased, $180.5 million of growth investments, and an increase in non-liquid deposits. So anyone reading the $469.9 million as money that is fully free in the widest sense is missing a real layer of cash uses the company already funded.

The gap versus operating cash flow matters just as much. Operating cash flow dropped to $1.046 billion from $1.445 billion. That sounds dramatic, but the explanation is not a collapse in the business. It is working capital. In 2024 deferred revenue and backlog surged. In 2025 deferred revenue stayed strong, but it no longer kept growing at the same pace. In other words, 2024 had a much stronger tailwind. 2025 is still strong, but on a less generous base.

This is another place where headlines can mislead. At year-end the company carried $1.1155 billion of current deferred revenue and another $252.4 million of non-current deferred revenue. In addition, the frequent-flyer points liability reached $280.2 million. So the big cash pile is not "free cash" in the most comfortable sense. Part of it sits against future flights, points and obligations for which the company already took the money.

Debt no longer suffocates the company, but it has not vanished either

The balance-sheet picture improved dramatically. Gross debt including leases fell to $1.276 billion from $1.519 billion. The company ended the year with a $684.6 million net financial surplus, and net finance expense almost disappeared to just $3.6 million. Deposits themselves generated $93.7 million of interest income, which is one of the main reasons net income eroded far less than EBITDAR.

But precision still matters. Inside that structure, $675.6 million are financial loans, and $600.9 million are lease liabilities. In 2026 alone the contractual schedule includes $121 million of loan principal and $107 million of lease principal, together $228 million, plus $56 million of interest. So there is no classic refinancing wall here, but there is still a meaningful fixed debt-service layer that has to be carried against a more normal earnings environment.

The good news is that the company still has real flexibility. At the end of 2025 it had about $210 million of unencumbered assets at market value, and after the balance-sheet date another $85 million of liens were removed. The company also remained in compliance with the local-bank LTV covenant, and the club subsidiary remained in compliance with its equity-to-balance-sheet covenant after the Phoenix loan amendment. So the risk is not a near-term funding emergency. The risk is more subtle: what profitability looks like once the cost base has already moved up, even if the balance sheet is strong.

Outlook

Five findings that matter before talking about 2026

First finding: demand has not broken. For ticket sales covering December 2025 through February 2026, the company reported $1.087 billion of gross sales, $146 million of refunds and vouchers, and net sales of $941 million. That is almost identical to the $945 million recorded in the comparable period a year earlier. More importantly, the future-period sales ratio increased to 56% from 47%. So in the near term, customers are still booking ahead.

Second finding: market share already fell sharply before a full return of foreign airlines. Annual share of 37.4% and fourth-quarter share of 32.5% are not small numbers, but they are meaningfully below 2024. That means the 2026 test is not whether competition exists, but how much of pricing power El Al can defend inside a market that is reopening.

Third finding: 2025 net profit looks cleaner than the operating line. EBITDAR fell by $164.3 million, but finance expense almost disappeared thanks to deposit income and lower debt burden. That helped limit the erosion in net income to $134.6 million. It is a useful cushion, but not one investors should automatically assume will keep improving at the same pace.

Fourth finding: the frequent-flyer club is now part of the moat, not just a marketing tool. Fifty-four percent of flight revenue is identified with club members, membership rose 8.7%, card count rose 15.9%, and the club subsidiary generated $156.3 million of operating cash flow. But after Phoenix moved to 25%, not all of that layer belongs entirely to ordinary shareholders.

Fifth finding: management is not preparing for 2026 by shrinking. It is doing the opposite. In the presentation, El Al shows a move from an average fleet of 50 in 2025 to 55 in 2026, alongside route expansion and 23 active partnerships at the end of 2025. In other words, the company is entering normalization while expanding supply, not while retreating.

2026 looks like a transition and proof year

Management builds its 2026 framing on five anchors: high demand against a still constrained seat supply, fleet growth, efficiency and labor changes, commercial partnerships, and continued development of the club. That is a reasonable framework. But it does not make 2026 an easy year. It does the opposite. It turns 2026 into the year El Al has to prove that its combination of brand, fleet, loyalty and liquidity can still hold up in a more competitive environment.

The right label here is a transition and proof year. It is not a crisis year, because the balance sheet is far too strong for that. It is not a breakout year, because competition is returning and the fourth quarter already showed that part of the economic surplus of 2024 has narrowed. The question is not whether El Al can remain profitable. It is whether it can remain very profitable.

What has to happen for the thesis to hold

The first thing that has to happen is that unit margin cannot keep closing. In 2025 TRASK of 12.06 cents still sat above CASK of 10.07 cents, but the cushion narrowed sharply versus 2024. If foreign carriers return faster and force price cuts while wages, leases and security costs stay high, the hit can show up quickly.

The second thing is that cargo needs to stop deteriorating. El Al does not need to get back to the distortions of 2024, but a 20.2% revenue decline and a 9% RTK decline are no longer just noise. If that engine keeps shrinking, it will erode one of the more profitable layers of the model.

The third thing is that early demand cannot start breaking through higher refunds and cancellations. For now, the backlog from advance ticket sales and vouchers stood at $927 million, almost unchanged from $930 million at the end of 2024. That is a good signal. But precisely because so much of the cash pile sits against future commitments, any change in customer behavior matters for both profit and cash.

The fourth thing is that the club needs to keep supporting loyalty and cash without creating the illusion that all of its profit is fully available upstream. If that engine keeps growing, it can offset part of the pressure coming from competition. If it slows, El Al becomes much more dependent on seat economics alone.

What could change the market reading in the short to medium term

A positive surprise would come if near-term net sales remain strong, if foreign carriers return more slowly than feared, and if the first quarters of 2026 show that RASK is holding up better than the market expects. Improvement in regulatory uncertainty around the Competition Authority would also clean up part of the risk discount.

A negative surprise would come from somewhere else: a faster return of competitors, more cargo erosion, higher fuel, a stronger shekel, or labor disruption. Here it matters that on February 19, 2026 the company already received a labor-dispute notice tied to the potential opening of a foreign airline hub at Ben Gurion and its implications for workers and financial strength. That is a reminder that normalization is not only competitive. It is also operational and organizational.

Risks

Regulation and competition already touch the earnings line

As of December 31, 2025 the company faced legal claims and contingent matters totaling about $1.122 billion, excluding the class-action request the company learned about in January 2026 regarding the rights of permanent employees who retired or were dismissed, with alleged damage of NIS 648.8 million. The provision recorded in the accounts, $64.4 million, means management does not see these issues as distant legal noise. It sees them as risks that already belong inside the financial picture.

That layer is now reinforced by the Competition Authority process. Even if El Al disputes the allegations, the mere fact that a provision was recorded around them means this is part of the 2026 economics, not just a headline risk.

Fuel, FX and security still work against El Al even when demand is strong

At the end of 2025 the company had hedged about 35% of planned jet-fuel consumption for the coming 12 months. That helps, but it does not remove the exposure. According to the company’s own sensitivity table, a 25% increase in fuel prices would lift expense by $74 million even after hedging. In FX, a 10% change in the shekel-dollar rate would move the dollar value of shekel expenses by $70 million after hedging.

Security costs are also no longer background noise. The company’s own share of aviation-security budget rose to 5% in 2025 and will rise to 6% in 2026. Management estimates the additional annual burden over the agreement years at $5 million to $10 million per year. That is structural pressure, not a one-off.

The balance sheet is strong, but the margin for error is not unlimited

El Al does not look like a company facing immediate funding stress. But anyone who confuses "no stress" with "everything is free" can still get this wrong. A large part of the cash balance sits against deferred revenue, loyalty obligations, and a lease structure that still requires $107 million of principal in 2026. In other words, there is no red flag here, but there is also no reason to read the entire cash balance as if every dollar were available for unrestricted distribution.

Cargo normalization and the return of foreign carriers are the main business risks

The real 2026 business risk is not a broad demand collapse, at least not for now. The real risk is that seats remain full but are sold on worse terms, while cargo keeps weakening at the same time. That is exactly the kind of risk that can preserve revenue while eroding margin.

Short Interest View

Short-interest data no longer shows an aggressive attack on the stock, but it does describe how the market mindset has moved. Between mid-November 2025 and late March 2026, short float fell from a 3.70% to 4.03% range to 1.36%, while SIR dropped from 5.29 to 6.90 down to 2.14. Those levels are still above the sector averages of 0.16% short float and 0.613 SIR, but the direction is clear.

The implication is that the market is no longer heavily positioned for a sharp collapse. It has moved from betting on the end of the extreme period to waiting carefully for the normalization phase. So the next reports are likely to be read less through the lens of a crowded short and more through the question of whether El Al can really sustain high profitability in a more open market.

Conclusions

El Al leaves 2025 as a highly profitable airline with a strong cash position, a strong loyalty engine, and a much cleaner balance sheet than it had only a few years ago. The main bottleneck has shifted from funding and survival to a more subtle question: what El Al’s profitability looks like once the shortage is less extreme and the cost base has already moved up. That is also what will shape the market reading over the short to medium term.

Current thesis: El Al is still generating a great deal of cash and profit, but 2026 is already a normalization test, not a survival test.

What changed: The center of the story shifted from whether the company could survive and accumulate liquidity to whether it can preserve high yield as competition returns and cargo weakens.

Counter-thesis: It is possible that the market is too worried about normalization, because demand remains strong, the fleet is growing, the club is strengthening, and the balance sheet gives El Al enough room to absorb a moderate decline in yield without funding stress.

What could change the market reading in the short to medium term: Better-than-feared pricing in the first quarters of 2026, a stabilization in cargo, a more benign regulatory outcome, or on the other side a faster foreign-airline return and sharper RASK erosion.

Why this matters: El Al is no longer being judged on whether it survived. It is being judged on the quality of its profitability in a market that is reopening.

What must happen over the next 2 to 4 quarters: RASK needs to hold better than feared, cargo has to stabilize, the regulatory layer cannot turn into a materially larger cash burden, and the cash position needs to remain strong even after debt service, investment and capital returns.