El Al 2025: How Much Liquidity Is Really Free After Leases, Deferred Revenue and Capital Returns

Where The Headline Number Stops

The main article already showed that El Al entered 2026 with a much stronger cash position than it had two years ago, but also with an open question around the quality of that liquidity. This follow-up isolates that gap directly: the distance between the number the company presents to the market and the cash that is actually free once the inconvenient obligations are put back into the picture.

In the capital-markets presentation, the company shows 2025 FCF of $470 million, before tax and after debt service. At the same time, the board report shows $1.961 billion of liquid resources available for use, and the presentation translates that into a net surplus of about $685 million after loans and lease liabilities. That is a strong number, and for good reason. It reflects lower debt, stronger operations, and a cash position that leaves El Al entering 2026 from a far more comfortable place.

But that comfort is not the same thing as free cash. A large part of the balance sits against flights already sold, loyalty points already accumulated, lease obligations that will keep draining cash, and a dividend that already left the company in January 2026. This is not a distress argument and it does not erase the real balance-sheet improvement. It is simply a cash-framing discipline: separating liquidity from liquidity that can honestly be called discretionary.

Deferred Revenue Is Not Debt, But It Is Not Free Cash Either

The easiest number to miss here is $1.368 billion of deferred revenue. This is not financial debt, so it should not be treated as if it were just another loan line. But it is also not free cash. It is cash that already entered the balance sheet before El Al delivered the flight, product, or economic benefit attached to it. In other words, it is excellent operating funding, but not a capital cushion that belongs only to shareholders.

The structure of that layer matters:

The simple reading says the total barely changed. The more useful reading is that the mix became a little less about straightforward pre-sold tickets and a little more about loyalty economics and obligations that stretch over time. The frequent-flyer points liability rose from $236.6 million to $280.2 million, up about 18.4%. That is not automatically negative. A stronger loyalty ecosystem supports demand and reinforces the commercial engine. But from a liquidity-quality perspective, it is still a reminder that part of the cash balance already has a destination.

The important nuance is that this is not a criticism of 2025 CFO quality. If anything, the opposite is true. In the operating cash-flow appendix, the increase in deferred revenue contributed only $0.3 million to 2025 cash flow, versus $415.1 million in 2024. So 2025 does not look like another year in which operating cash flow was inflated by a fresh surge in customer prepayments. That is actually a point in El Al's favor.

The implication is different. Even if 2025 operating cash generation was cleaner than 2024, the year-end balance sheet still carried a very large stock of customer-funded obligations. That is why taking the $1.961 billion of liquid resources and translating it directly into "cash available for allocation" is too generous a shortcut.

Leases Still Take A Recurring Bite Out Of The Cash Balance

It is easy to see the decline in lease liabilities on the balance sheet and miss the fact that leases still sit deep inside the cash-flow picture. Lease liabilities fell from $696.3 million to $600.9 million during 2025. That is real progress and part of the reason the total debt picture looks much healthier. But in actual 2025 cash flow, El Al still paid $151.0 million for leases recognized under IFRS 16, of which $118.0 million was principal and $33.0 million was interest.

That matters because anyone looking only at the financing section sees $118 million and may assume that captures the whole lease story. In practice, even within the narrower IFRS 16 bridge, the real lease cash outflow is higher than that. And one step to the side, the income statement still carries another $99.7 million of lease expense not recognized under IFRS 16, mainly short-term leases. That is not the same cash bridge, but it is still a reminder that the operating burden of aircraft access is wider than the principal line alone suggests.

This is also how the forward schedule should be read. The liquidity note shows 2026 loan principal of $121 million, lease principal of $107 million, and total interest of $56 million. Before talking about CAPEX, growth, or strategic moves, that already means roughly $284 million of contractual cash obligations over the next year.

There is also an important caveat here: this is a floor, not a ceiling. The company explicitly says the table does not include future loans or future leases, including the expected financing tied to the seventeenth Boeing 787. So when thinking about capital-allocation freedom, these contractual cash numbers should not be treated as the full financing need of the fleet.

Equity-Linked Cash Also Helped Build The Cushion

Another shortcut worth cutting is the assumption that the stronger year-end cash balance came only from operations. In the statement of changes in equity and in the board report, the company states clearly that part of the equity strengthening came from warrant exercises. In cash flow, El Al recorded $113.5 million net from warrant exercises. Note 18 makes the split more concrete: about $25.2 million came from Series 2 exercises and about $88.7 million from Series 3 during 2025.

There is nothing wrong with that. On the contrary, it is a legitimate way to strengthen the balance sheet, reduce funding pressure, and widen flexibility. But it is still a reminder that part of the 2025 year-end cushion was supported by equity-linked cash, not only by recurring business cash generation. That makes it an important capital reinforcement, not recurring free cash.

That needs to be set against what happened immediately after the balance-sheet date. In January 2026, the company paid a dividend of about $102 million. That number almost offsets most of the net warrant cash received in 2025. Later, after the reporting date, another roughly $19.6 million came in from Series 3 exercises, so the post-balance-sheet flow is not one-directional. But the sequence still matters: before the company proved over another reporting cycle how much of that 2025 cushion would actually rebuild through operations, part of the surplus had already been returned to shareholders.

That is exactly the point of this continuation. The argument is not that the dividend was necessarily a mistake. The argument is that the dividend mechanically narrowed the cash margin that sat behind the comfortable year-end headline.

A Stricter Liquidity Bridge: How Much Is Really Left

To make the gap concrete, it helps to build a stricter bridge. This is not an earnings bridge and it is not a solvency forecast. It is simply an availability test: how much of the year-end cash balance can reasonably be called free without leaning on generous assumptions.

In that bridge, I subtract four layers from liquid resources: total deferred revenue, the contractual principal due in 2026, the contractual 2026 interest bill, and the dividend already paid in January 2026.

On that reading, about $207 million is left. That is not zero, and it is not a funding-stress case. But it is also very far from the instinctive reading created by $1.96 billion of liquid resources or a $685 million net surplus after loans and lease liabilities.

It is also fair to be careful with this harsh number. It is deliberately conservative because it subtracts all non-current deferred revenue as if none of it should be treated as available. If a slightly less strict approach is used, and only the $1.115 billion of current deferred revenue is deducted, the residual rises to roughly $460 million. That means the reasonable range for "truly free liquidity" is not $1.96 billion, and not really $685 million either. It is probably something closer to $200 million to $460 million, depending on how conservative one chooses to be about the long-term deferred-revenue layer.

The business conclusion is clear. El Al is not sitting on fake liquidity. The liquidity is real. It is simply not the same thing as full capital-allocation freedom. A large share of it is already funded by customers, another share is reserved for debt and lease service, and part of it was already distributed after year-end.

Bottom Line

El Al ended 2025 with strong liquidity, but not with $685 million of free cash. That is the core point. The company succeeded in reducing debt, generating $1.046 billion of operating cash flow, and carrying $1.961 billion of liquid resources. Those are all real and strong numbers. But that same balance also sits against $1.368 billion of deferred revenue, against a multi-year lease and repayment path that still requires hundreds of millions of dollars, and against a dividend paid immediately after year-end.

This is also not a simple bearish story. On the other side of the balance sheet, El Al had $210 million of unencumbered assets at year-end, and after the reporting date the group removed additional liens worth about $85 million. That is real financing flexibility. It can help with refinancing, fleet funding, and balance-sheet maneuvering. It simply does not turn the whole liquidity layer into distributable excess capital.

So the next test is not whether the company has cash. It does. The next test is whether in 2026 El Al can keep building operating cash after the dividend, after leases and repayments, and without leaning again on equity-linked inflows or on an overly generous reading of deferred revenue. If it can, the market can read year-end 2025 liquidity as a durable base. If not, it will become clear that the cash balance was strong, but much less free than it first appeared.