Credit Card Wars Heat Up in Israeli Aviation Sector

A significant shake-up has occurred in Israel's airline credit card market, previously dormant for years. The flagship product, Flycard, previously managed by Cal through Diners, has transitioned to Isracard. This move surprised the market, as Flycard, associated with El Al's frequent flyer program, is the strongest card in the sector, boasting significantly higher usage than average. At the time of the transfer, the frequent flyer club had approximately 3.5 million members, with 550,000 holding the Flycard. This strategic shift is largely attributed to Isracard CEO Itamar Forman and Flycard CEO Moshe Morgenstern. The El Al frequent flyer club, co-owned by El Al (75%) and The Phoenix (25%), was valued at around 2.7 billion shekels during the transition, double its valuation four years prior. Airline loyalty programs are globally attractive due to benefits like point accumulation for flights, upgrades, lounge access, duty-free discounts, and other purchases. Flycard's move is estimated to have accounted for about 15% of Cal's revenue and 25% of its profit. For Isracard, this is a major development, with projections of 120-160 million shekels in pre-tax annual profit for the next decade, totaling 1.2-1.6 billion shekels. Despite significant launch investments, Flycard anticipates substantial profit contribution this year.

Cal, caught off guard, responded swiftly under new CEO Yafit Grani. The company sued Flycard for breach of contract and launched its own new card, Flyall, with tens of millions of shekels invested in advertising and benefits. Despite a legal dispute over the name's similarity to Flycard, Flyall reportedly attracted around 100,000 customers in a short period. A new player emerged a month ago when Rami Levy and Israir partnered with Isracard to launch Superfly, leveraging Rami Levy's existing customer base of approximately 200,000. Israir acquired a 10% stake in Superfly, valued at about 315 million shekels.

The competitive landscape now features four main players: El Al's Flycard and Superfly (both with Isracard), Cal's Flyall, and Max's Max Travel. Flycard and Superfly are directly linked to airlines, offering greater flexibility in flight-related benefits. Flyall and Max Travel focus more on a cashback model directed towards tourism. The combined marketing and launch efforts by these four entities are estimated to exceed 100 million shekels, including sign-up bonuses and promotional campaigns. However, Flycard and Superfly are seen as having a fundamental advantage due to their direct airline affiliations, enabling benefits that are harder to replicate solely through cashback, particularly appealing to business travelers. While Flyall and Max Travel offer value through tourism-focused cashback, they require continuous investment in marketing to retain customers. Cal's Flyall was launched partly as a response to Flycard's departure, successfully retaining some customers short-term. Flycard also introduced a hotel booking feature for its customers, seemingly as a direct counter to Flyall's offerings.

Isracard appears to be in the strongest position, managing both Flycard and Superfly, which are directly tied to airlines. Beyond card revenue, these partnerships also drive additional customer activity, including credit and loans. Rami Levy is expected to aggressively market Superfly through his retail stores, utilizing his large customer base for cost-effective acquisition. Isracard's dual airline-linked cards provide a competitive edge, offering benefits beyond simple points or cashback that are directly integrated with the flight experience.