El Al Israel Airlines Ltd. (TASE: ELAL) is planning to launch a credit card. The main benefit will be bonus points that can be converted at an especially attractive rate for the purchase of tickets.
Sources inform “Globes” that the company, whose CEO Elyezer Shkedy resigned earlier this week, has issued a tender for collaboration with credit card companies Isracard Ltd., Leumi Card Ltd., and Israel Credit Cards-Cal Ltd. (ICC-Cal) (Visa).Sources believe that the tender should be completed in the next few weeks.
The credit card will be offered to members of the Matmid frequent-flier club, which has 1.25 million members. The Matmid bonus points offered by the card will be at a significantly better rate than those offered by existing credit cards. However, the card’s fees will be relatively high, possibly as high as tens of shekels a month.
El Al is planning two cards: Bronze, and Premium. The Premium card will be more expensive and more exclusive, resembling Leumi’s World Signia card. It is possible that more than one credit card company will win the tender, for each of the categories. The credit card companies have expressed interest in the club. Sources in the sector estimate that there is potential to issue 100,000 cards, 20,000 of them Premium.
Aiming high
Already today, a significant portion of bonus points are used to purchase airline tickets, so if a card with an attractive point-redemption rate is issued, then it is likely to encourage many customers to use it to accrue points. Matmid Club members are middle class and above, with high credit card use.
In the past year, credit card companies have reduced benefits for using points for Matmid Club members. Most of the companies have excluded payments to local authorities and to government bodies from payments that earn points. The reduction in benefits was carried out to save the credit card companies money. The main casualties of this new policy are business customers, who pay their company bills by credit card. These are significant purchases that accrue many points.
Through this move, El Al will attempt to leverage the power of its brand in the credit card market, like Delta, Lufthansa and other international carriers, who even offer discounts on ticket purchases charged to the credit cards they issue.
The company said, “The issue is on the agenda at El Al. Beyond this, the company does not talk to the media about its future plans.”
Low-cost fares
The launch of the branded credit card comes shortly after El Al's announcement of its new low-cost flight brand, called “Up.” El Al will allocate 5 planes to the brand, which will operate in a low-cost carrier format, and will initially fly to 5 destinations in Europe. This process is underway as part of the competition among the discount carriers, that are increasing their presence in Israel following the government’s approval of the “Open Skies” policy.
Published by Globes [online], Israel business news - www.globes-online.com - on December 3, 2013
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