El Al at a Turning Point; A Mirror of Israel's Divisions Prepares to Go 49% Public

As airline employees cheered, the shiny Boeing 737, a blue Star of David freshly emblazoned on its tail, touched down at Ben Gurion International Airport here, the first of eight new Boeing jets that El Al, the Israeli international flag carrier, is acquiring this year.

This $600 million fleet upgrade, the biggest aircraft investment in El Al's history, is the most visible and costly part of a campaign to prepare the airline to sell stock to private investors as early as April. With a redesigned logo, chic new uniforms and an income statement modestly in the black after recurring state-subsidized losses, El Al is trying hard to become what Tom Schick, executive vice president at Boeing, called in a visit here ''a new, aggressive and customer-focused airline.''

Like Israel itself, El Al is 50 years old, proud of a pioneering past and a proven ability to survive, even thrive, in adversity. Also like Israel, the airline must cope with deep divisions, both political and cultural, as it strives to compete as an equal in the world market, without compromising its security or special national identity.

Private ownership and private management are the keys to El Al's economic future, its executives say, taking their cue from dozens of other state airlines that have been converted into commercial enterprises in recent years. But El Al Israel Airlines Ltd. is no ordinary airline, and selling it is no ordinary marketing challenge.

Its history as a terrorist target has made it perhaps the most security-conscious carrier in the world. Every flight has its own undercover armed guard. Nearly every pilot is a former Israeli Air Force officer. At home and abroad, baggage inspections and pre-flight security checks are carried out in deadly earnest, with the company's own state-of-the-art equipment and specially trained personnel. Aircraft like the new 737's are fitted at company hangars with classified Israeli security hardware.

All this adds $70 million to $100 million a year to operating costs, El Al officials say. That is a daunting sum for a company that generates about $1.2 billion in annual revenues. Under state ownership, about two-thirds of this expense has been absorbed by Israeli security agencies, but the Government and El Al management are now debating how these costs should be shared, and calculated, once El Al is no longer wholly owned by the Government.

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