The initial reaction to Transport Minister Ephraim Sneh's statement that the Nasdaq crash is responsible for El Al's ills is to snort.
Nasdaq? OK, one could blame it for the demise of dot.coms or kooky little startups that counted on raising money there. But did our national airline base its business plan on Nasdaq?
Still, the minister has a point. The way the airline was run has reduced it to the absurdity of being instantly reduced to the brink of bankruptcy by the first crisis to hit the financial markets and tourism industry.
El Al's PR division has been very lively: special deals, ad campaigns, slogans about service - and mainly it kept the picture of its departing CEO, Joel Feldschuh, gracing the financial pages.
If you didn't know about the company's financial affairs, you might have thought it had drastically mended its ways. From being a 1980s icon of bad management and dreadful labor relations, El Al might seem to have morphed into a stellar success.
Good ol' El Al
But it hadn't. El Al version 2001 has retained many of the vices of the old El Al we know so well. The main factor keeping it cruising all these years is that the atmosphere had been uplifting.
Said "atmosphere" consisted of the peace process, burgeoning tourism to Israel in the last decade, the hi-tech boom that spurred a stream of executives to fly between Israel and the West, and a steep drop in fuel prices.
Nasdaq influenced more than the traffic of hi-tech managers, bankers and venture capital investors. It also affected El Al's profit and loss statement directly. In the last couple of years, the company posted one-time gains of tens of millions of dollars from selling shares it received, by virtue of belonging to the International Air Transport Association, IATA, in Equant (NYSE:ENT).
Equant, located in Amsterdam, the Netherlands, established an international data communications network, which was a very fashionable line of work at the time. Its public issue was a great success and El Al managed to realize its Equant shares at peak prices. But just like the traffic volume of hi-tech engineers and bankers plying the Tel Aviv-Los Angeles route, Equant's share price dived, by some 80%.
The chart of Equant shares could just as well depict the situation of El Al's business.
Equant stock. A mirror of El Al's business?
A year ago, the weather began to cool rapidly. Nasdaq began to collapse and with it, much of the hi-tech industry. Then came the second intifada, which wreaked havoc on the whole economy but hit the tourism industry particularly hard. Within months, El Al's true condition became apparent - weak, fragile, a true fair-weather flier only.
It became apparent that for all its protestations, El Al had not changed at all, at least as far as spending was concerned. It is overstaffed and its labor relations are bad.
It also transpires that the salaries of veteran pilots had taken off into the wild blue yonder, to levels such as NIS 100,000 a month, three times and more the wages of younger pilots.
As long as the hi-tech boom could cram the red-eyes heading for New York, El Al could maintain the fiction that it had mended its ways. But as the Nasdaq bubble ran out of air and the famous LY 001 line began to fly half-empty, it became apparent: El Al is not cut out for crises.
The government has not done enough to cure the airline's ills. It did not privatize El Al, or amend its labor structure, or solve the problems of Shabbat flights and its enormous security bills.
The story of El Al is the story of the Israeli marketplace in a nutshell. The boom in the business sector in general and of hi-tech in particular, created a mirage of fundamental change. But the moment crisis arrived and the financial markets reversed direction, it became apparent that the public sector had not changed at all. If anything it had become more bloated than ever, fed by the burgeoning business sector.
The result is that the public sector, the government, the public budgets and monetary policy that were supposed to help the private sector overcome its cyclic crises, not only aren't helping - they are a millstone around the private sector's neck.