It’s official: El Al Israel Airlines Ltd. (TASE: ELAL) is launching credit cards. Yesterday, the company announced that it had signed agreements with three credit card companies to issue cards jointly for members of the Matmid frequent flyers’ club. The cards will carry preferential terms for redeeming points towards airline tickets. The primary agreement is with Diners Club, which is owned by Cal-Israel Credit Cards Ltd. El Al will offer two types of cards - Bronze and Premium. The Bronze card will be issued by Diners, and the Premium cards will be issued by all the credit card companies: Isracard Ltd. will issue the card through American Express, and Cal through Leumi Card and Diners.
According to estimates, Diners will offer a conversion rate of NIS 250 per Matmid frequent flyer point, while in the Premium category, the rate will be approximately NIS 200 per point. The Premium category is suitable for cards with monthly spending over NIS 10,000, and the fees are expected to be high - tens of shekels each month. The conversion rates in both categories are significantly higher than those currently offered by credit card companies, of NIS 350 per point, at best.
In addition, EL AL announced that it had signed a partnership deal with the YOU customer club, jointly owned by Alon Holdings Blue Square - Israel Ltd. (NYSE: BSI; TASE: BSI) Dor Alon Energy in Israel (1988) Ltd. (TASE: DRAL), according to which holders of YOU cards, which are issued by Diners, will also be able to accrue Matmid frequent flyer points.
El Al estimates that, with the implementation of the deals, there will be progressive growth in the number of Matmid members who accrue points, thanks to the preferential conversion rates. Today, there are 1.3 million Matmid club members. Sources in the credit card industry estimate that the potential is for 100,000 new credit cards to be issued, 80,000 of them Bronze.
Diners’ exclusive rights in the Bronze category are no small matter. According to estimates, Diners made a particularly high offer in order to gain exclusivity in the category. Other than the high conversion rate, the company also agreed to an estimated $10 million in funding towards advertising and marketing the card.
Cal’s willingness to make a significant investment in El Al’s card stems from the fact that the company hopes that this partnership will lead to significant growth for Diners, which has been stagnant in recent years. The number of active Diners cards is under 200,000, and its market share is just 2%.
Published by Globes [online], Israel business news - www.globes-online.com - on June 12, 2014
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