Israeli airline El Al's recent windfall resulting from the suspension of foreign airlines' flights to the country has become a point of much discussion in Israel.
The company's dominance in travel to and from Israel has not only boosted its financial results and the value of controlling shareholder Kenny Rozenberg's (48.8%) holdings — which increased by around NIS 1 billion ($266 million), bringing El Al's market value to over NIS 3 billion ($798 million) — but has also benefited El Al's top executives, led by CEO Dina Ben Tal Ganancia and Chairman Amikam Ben Zvi.
The paper profit for the company’s CEO, chairman and 13 other office holders from the potential exercise of options they received in the last two years has surged to NIS 39 million ($10 million) following the rise in the share’s price.
This comes in addition to the cash compensation they're entitled to, which includes a fixed salary and bonuses — calculated as a percentage of the company’s annual profit. Since profits have already jumped in 2023 and are expected to continue rising in 2024, their bonuses have also increased and are likely to approach the maximum cap this year.
In December 2022, El Al allocated Ben Tal Ganancia, who has served as CEO since May of that year, and Ben Zvi, who has been chairman since October 2021, 2.6 million stock options: 1.45 million for the CEO and 1.15 million for the chairman. The exercise price was set at 3.89 shekels per share, 5.12% lower than the share's value at the time of the allocation approval (October 30, 2022).
Their vesting period spans three years, with one-third of the options vested in July 2023, another third this past July and the remainder set to vest in July 2025. The exercise period is set for up to seven years. At the time of allocation, the options’ fair value was estimated at NIS 2.99 million ($798,631) for Ben Tal Ganancia and NIS 2.37 million ($612,284) for Ben Zvi.
Now, with El Al's adjusted stock value having surged 127% since the approval of the allocation and the price stabilizing at 7.34 shekels per share, the potential paper profit from the options held by Ben Tal Ganancia and Ben Zvi has reached NIS 9 million ($2.3 million), with 5 ($1.3 million) million for the CEO and 4 million ($1 million) for the chairman.
In October 2022, shortly after the allocation to the CEO and chairman, El Al allocated 7.1 million options to 11 company executives under similar conditions, with a value estimated at NIS 14.6 million ($3.8 million) at the time. Two years later, the potential profit for these executives from exercising the options has cumulatively risen to NIS 24.5 million ($6.5 million), averaging about NIS 2.2 million ($585,663) per executive.
A year later, in December 2023, the company allocated 1.4 million options to two other executives at an exercise price of 3.25 shekels per share (2% below the share price at that time) and valued at NIS 2.4 million ($638,905).
These are exercisable in three equal annual installments starting in July 2024. Based on the current share price, the potential paper profit for these two executives from exercising the options now stands at NIS 5.7 million ($1.5 million).
Ben Tal Ganancia’s employment agreement includes a gross monthly salary of NIS 120,000 ($31,945) (reduced to 96,000 shekels [$25,556] until April 2023), an annual bonus of 2% of the company’s annual pre-tax profit capped at NIS 3 million ($798,631) and eligibility for equity compensation in the form of options allocated to her later in the year.
Ben Zvi, who has served as chairman since October 2021, has been entitled to a gross monthly salary of NIS 102,000 ($27,153) and a bonus amounting to up to 81% of the CEO's bonus as of June 2023, in addition to the options he received in 2022.
According to these terms and given El Al's 2023 performance — reaching record revenues of $2.5 billion (a 26% increase) and a pre-tax profit of $125 million compared to a loss of $14 million in 2022 — Ben Tal Ganancia's total salary cost in 2023 reached NIS 6.2 million shekels.
This included NIS 2.2 million ($585,663) in fixed salary, NIS 2.4 million ($638,905) in bonuses, and NIS 360,000 ($95,835) in bonuses for 2022, with the remainder representing the options’ value. Ben Zvi received a salary totaling NIS 4.2 million ($1.1 mil), of which NIS 1.4 million ($372,694) were fixed and NIS 1.8 million ($479,179) were bonuses.
El Al was showing signs of recovery in 2023 even before the war began on October 7, benefiting from the period following the COVID-19 pandemic.
El Al’s pre-tax profit reached $39.8 million in Q4 2023 compared to $7.4 million year-on-year. Revenues in the first half of 2024 rose by 40% compared to the same period in 2023, reaching $1.57 billion.
Pre-tax profit, which determines the annual bonuses, soared to $293 million, compared to $33 million year-on-year and more than double the amount for all of 2023. The trend is expected to continue in the third quarter due to the numerous flight cancellations by foreign carriers. El Al's market share was 59% in Q4 2023, up from 21% in the previous year.
The company’s market share rose to 62% in Q1 2024 compared to 22% year-on-year, dropping to 43% in Q2, but still remaining significantly higher than the 24% recorded in the corresponding period last year.
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