Oz Berlovitz was appointed CEO of Arkia Airlines, during one of the most difficult times for the company and the Israeli aviation industry. He has regular and detailed plans on how to reduce the crisis and how to emerge from it to prosperity.
Oz Berlovitz started working at Arkie 25 years ago as a steward, advanced to the position of chief steward, station manager, manager of the stewards department, assistant to the CEO, and is currently the CEO of the company. He looks and sounds in love with his job and the aviation field. “Aviation is a germ and it’s a profession” he declares. Israel has only 3 airlines, only a few thousand employees, and one international airport. “Experience is the most important, because there is sensitivity to politics, the dollar exchange rate and security situations like the war in Gaza.”
In the field of aviation, it is humorously said that Oz Berlovitz’s success is guaranteed, because the aerial situation could not be worse. From here you can only go up. We asked to hear from him about his plans as CEO of the company.
Mr. incoming CEO, how does the war in Gaza affect Arkia?
The war affects not only Arkia but the entire aviation industry in Israel. Today we are working at only 20% of our normal activity, compared to December last year. Obviously we also work less. We are using the current winter months for thorough maintenance work on our planes, a C-CHECK that lasts several weeks for replacing assemblies and renewing parts in the planes and engines, even though according to the manufacturer’s instructions the date for their replacement has not yet arrived.
This explains the operation, but what happens to your cash flow when there is no revenue?
We took various actions to reduce expenses at the same time as reducing income. We try to focus only on necessary expenses. 50 of our employees are recruited, and their salaries are paid by the National Insurance. Unfortunately, we laid off about 200 additional workers. We manage to survive on limited and necessary manpower only.
This is about international flights. But what is happening on your line to Eilat?
The line continues to work. The evacuation plan changed the type of passengers. On the route to Eilat, we flew 38,000 passengers in December, compared to 47,000 passengers in December 2022. On this route, the decrease in activity is quite tolerable. Don’t forget that nowadays Israelis rarely fly to Eilat for vacations, because the hotels are full of evacuees.
What is your forecast for the tourism and aviation industries in the near future?
I am optimistic that the industry will return to strength by the summer. The public is looking ahead to the Passover and summer vacations, and is already starting to order. There are already spontaneous short-term orders of two days to a week, mainly from young people, and fighters who are released from reserves in Gaza and want to freshen up and change atmosphere. To me, this marks the end of the crisis.
You are the only Israeli airline that does not observe Shabbat. How does this affect your sales in the religious and traditional public of Shabbat and Kosher observants?
We work a lot with the religious community. Religious tourism wholesalers ordered entire planes with us in preparation for the upcoming Passover holiday to fly their customers to Passover vacations abroad, especially to Greece, Montenegro, Dubai, and Georgia. Even to Vietnam they checked charter flights through us for the Passover holiday. In addition, before last Rosh Hashanah we operated 36 flights Charter for a craftsman.
Religious wholesalers order a lot of charters for kosher vacationers during Passover and summer, because they know that with us they and their customers receive the best service. The kosher food served on our flights is just like in El Al and Bishrair. So reality proves that we have no disconnect with the religious public and with the religious wholesalers.
Arakia will inaugurate on February 6 a new line to Sri Lanka, which is One of the most popular tourist destinations in the world. The line to Sri Lanka was supposed to be inaugurated at the end of November, but the maiden flight was postponed because of the war. After all, the war isn’t over yet, so what made you decide to inaugurate the line at the beginning of next month?
We conducted a survey among customers who purchased flight tickets for the past months, many of them expressed a desire to fly in February, in the estimation that by then they will finish the reserves. After assessing the situation at our place, we decided to go with the will of the market, and thus set the target date of February 6. Our flight to Sri Lanka will be direct and the shortest, without connections and changing planes.
Oman again prohibits Israeli airlines from flying in its airspace. How will this affect your lines to Sri Lanka and India?
This will lengthen the road and fuel expenses. The flights to Sri Lanka on the short route over Saudi Arabia and Oman were planned to be 6 hours and a quarter. Our planes can handle it. But now the flight will last 10 hours, at the limit of the capacity of the narrow body planes. Therefore we will make an intermediate landing in Seychelles to refuel. The stop will last up to 40 minutes, and passengers to Sri Lanka will not get off the plane.
There is also an advantage to this glitch. Passengers will be able to disembark at Mahe for a holiday in the Seychelles, and this line will serve two destinations. This way the planes will also be filled more.
We are talking about Oman, and this raises the concern of a new risk from the Houthis in Yemen. How does this affect the long line over the Red Sea and the Red Sea?
There is no connection. Our route does not pass over the Straits of Bab el Mandav, where the Huts operate.
Extending the flight increases expenses and consequently also the prices of plane tickets. The price you set for a ticket to Sri Lanka on the short route was $600. What will be the price of the flight tickets on the longer route?
The price will be from $800.
How do you open a new line to a place like Srilanka?
It is hard work involving many factors over a long period of time. We worked on the line to Sri Lanka for about two years. It started with her contacting the Civil Aviation Authority of Israel, which turned to the corresponding authority in Colombo, the capital of Sri Lanka. At the same time, I did staff work with the Ministry of Defense regarding security personnel and the equipment that would be allowed to be put on the plane. The security requirements are the Achilles heel of any new line. Israel has requirements regarding special guarding of passengers in the terminal, and guarding the route of transferring the luggage to and from the plane. Some airport managers are unwilling to change their usual handling of baggage and check-in counters, and this involves discussions and compromises. Asian countries are very bureaucratic and it is difficult to move things there.
Fortunately, RTA rallied to the matter, and pressured the Sri Lankans until they reached an agreement. Without this, their security personnel would not have compromised either, and the discussions could have continued for another two years. in Israel at the IMTM fair two years ago).
Can you give us examples of destinations that you’ve looked into and ended up not being approved for?
Yes. The recent example is the Maldives. It is a desired destination for Israelis, with sky-high business potential. I have a dream to fly there too. The Maldives is a Muslim country. When I started checking with them, they refused to allow landings for flights that take off from Israel. political. We suggested making a stopover and taking off to a non-Israeli destination, and that didn’t help. So for now we gave up on the Maldives, but I continue to keep my finger on the pulse.
What will be the prices of plane tickets to Sri Lanka?
Around starting at $880.
What projects are you promoting in this period?
We are constantly working on new goals. In 2024 I hope to open another six new destinations. In addition, they are working on a technological revolution in the sky. It requires a lot of investment of time and money. What you sow today in the field, you will reap at least another year and a half.
These are destinations in nearby Europe and the Mediterranean basin. The exact goals are secret for the time being for strategic reasons, so that our competitors will not get ahead of us. I can only reveal that following our great success on the line to Montenegro, we will add destinations in this region and the Mediterranean basin.
Do you have enough planes for this purpose? Are changes expected in your aircraft fleet in the coming years?
Yes. Today we operate 3 Embraer aircraft and two Airbus 321 Neo aircraft. With such a small fleet it is difficult for us to cope with the large demand, and we do not have enough planes to open new destinations as we wish and according to the market requirements. That’s why we decided next year to lease 2 or 3 Airbus planes on a dry lease (with air crews of Arkia pilots and flight attendants), and another 3-4 planes on a wet lease (with a foreign crew) for the spring and summer months only. We are still reviewing offers for Boeing 737s or Airbus 320s, or both. We are also thinking of replacing part of our Embraer fleet with Airbus aircraft.
And what about the possibility of purchasing or leasing wide-body planes that will allow you to fly to more distant destinations such as Bangkok and New York?
We had a wide-body plane, a Boeing 767, in which Arkia flew to Thailand. A large plane must be operated for a long distance. It requires very complex logistics, and the chances versus the risks are similar. That’s why we decided in the past to give up the 767. And yet I constantly check the business viability of a wide-body plane and suitable destinations. For now, there is no decision to go into it either.
How do you deal with the low cost companies that have taken over 30% of the air traffic from Israel?
With the outbreak of the war, the Lowcost companies “got off the field”. They will not return before April, and even then they will return with low intensity, at least at first. The closing of Terminal 1 also prevents them from returning by the hour. When they return, it will be with fewer weekly flights. That’s why we at Arkie, and the other legacy companies, will fly more to central destinations in Europe.
Until the war, the three Lowcost companies in Israel flew more passengers than all the Israeli airlines combined. It was difficult for us to deal with the low-cost companies at the marketing price. Therefore, we adopted a strategy to market products that the Lowcost companies do not have. Arkia always combines the airline with the travel company together. This is how we offer packages of flights with overnight stays and with local trips, and with tickets to shows and concerts and major sports competitions. This is how we compete successfully in the Lowcost companies. We combine aviation with tourism, with products that are competitive with Lowcost. A Lowcost passenger who tries to put together such a package himself will end up paying more than with us.
In contrast to you, Israir is making further progress in the field of tourism, and it also buys hotels at the destinations of its flights, and equips the kitchens in them. How do you think progress in this field?
Israir is an airline that enters hotels. With us it is the opposite. Our owners, Jordesh and Naksh own a huge hotel company, which also bought an airline, Arkia. Our group has more hotels to offer.
How do you sum up the year 2023, and what personal achievement are you most proud of?
The success of the company’s recovery from the Corona crisis. We were the only Israeli airline that was silenced. In 2020, we laid off 98% of the employees. The company was closed for about a year. There are other airlines abroad that did this, but most of them did not survive. Whereas we returned to operating Arkia in record numbers, and in 2022 we brought it to profitability.
Another achievement is that in 2023 Arkie reached second place in Israel in terms of the number of domestic and international flights. And this with a lean company, and 25% fewer employees than before the corona virus.
You recently achieved industrial peace with wage agreements that granted an additional 10% to the workers’ wages. Your competitors claim that you were too generous, and now their employees also demand a comparison of conditions. What do you think of this claim?
The labor and salary agreements are very important for the development of Arkii in the near and far future, according to market trends. Arkie has 5 workers’ committees, for the pilots, flight attendants, mechanics, ground workers, and reservation workers. We conducted long and tedious negotiations with each committee, and we were able to reach agreements that improve their wages in line with wages in other airlines. The workers received a 10% increase and the pilots received a 30% increase.
Arkia reached agreements with its employees after El Al Vishrair had already signed their own agreements with their employees. The one who raised the bar of the pilots’ salary is not me, but El Al Vishrayer. I closed after them.
In Oz Berlovitz’s opinion, Israeli aviation is very important. He regrets that there are people among us who do not value Israeli aviation, and value companies more aviation strangeness. “The Israeli market is small, but at a premium the Israeli passenger has great value. An Israeli feels at home on an Israeli plane, more so than on a plane of a foreign company like Lufthansa.”
