Israel Railways revenue rose by 9% - but net profit plummeted by 68%

Israel Railways concludes the second quarter of 2026 with an increase in activity and revenue, but also with a significant erosion in profitability. The company's revenue for the quarter totaled approximately 984.6 million shekels, compared to about 901.9 million shekels in the corresponding quarter last year - an increase of about 9%. The main growth came from the passenger sector, which generated about 867.6 million shekels - an increase of about 68 million shekels, and from the freight sector, whose revenues grew by about 15% to about 91.8 million shekels.

Gross profit fell from about 81.8 million shekels in the second quarter of 2025 to about 49.5 million shekels in the said quarter. The railway even moved from an operating profit of about 30 million shekels to a loss of about 9.1 million shekels. Net profit totaled about 18.6 million shekels, a decrease of about 68% compared to about 57.5 million shekels in the corresponding quarter. The EBITDA, which stood at 50 million shekels in the corresponding quarter last year, stood at 11.8 million shekels in the said quarter.

The increase in passenger revenue was also accompanied by a recovery in the number of trips. In the second quarter, about 17.9 million trips were recorded, compared to about 16.2 million in the corresponding period last year - an increase of about 10%. However, the comparison is affected by the security disruptions in the corresponding quarter last year, when the railway's activity was reduced following Operation 'Am Kelavi'. That is, part of the growth reflects a recovery from a low activity base and not necessarily a corresponding increase in demand.

The cost of sales, works, and services jumped by 14% in the quarter, reaching about 935 million shekels. Among other things, wage expenses increased by 38 million shekels. The railway explains that the increase is mainly due to an increase in the workforce in the passenger and freight sectors during the period and an increase in overtime hours and premiums, shortening of the work week, an increase in the minimum wage, and a percentage addition in the collective agreement. In addition, security and guarding expenses increased by 20 million shekels due to the increase in activity, and communication and electronics expenses by about 12 million shekels. In addition, there were increases in fuel, maintenance, computing, cleaning, and electricity expenses.

At the same time, the railway continues to invest in expanding infrastructure. In the first half of the year, fixed assets under construction increased by about 1.24 billion shekels. Among the projects in which funds were invested: the Eastern Railway, the 431 railway, the fourth track in Ayalon, the doubling of the coastal tracks, the purchase of electric rolling stock, platform extensions, and electrification projects. However, the expansion of infrastructure occurs alongside a high dependence on the state. About 87% of the company's revenue in the first half came from operating fees from the state, and the railway also receives full funding from it for development activities.

According to the railway's report, there is additional uncertainty in the background: the railway's development and operation agreement ends at the end of 2026. The company has already warned that there is difficulty in completing a new agreement by January 2027 and asked to examine an extension of the existing agreement for a year or two, in order to maintain operational and budgetary certainty. As of the report date, binding agreements have not yet been reached.

In addition, Israel Railways has been operating for more than two months without external directors. The railway filed a petition to the Supreme Court to compel the Minister of Transport Miri Regev and the Minister in charge of government companies Dudi Amsalem to appoint directors. At the same time, the Securities Authority also warned that the continuation of the situation could harm the company's ability to meet corporate governance requirements and even affect the approval of financial reports, trading in bonds, and the company's ability to raise debt in the future. The situation could also put the railway's bonds at risk of immediate repayment.

In addition, the railway is operating without a permanent CEO. The position of railway CEO has not been filled since the departure of the previous CEO, Shiku Zana. Initially, he was replaced by the railway's VP of Planning and Operations, Avi Elmalich, but last March Elmalich was forced to take a long leave and a new acting CEO was appointed - Regev's associate, Avner Flor. Even after Elmalich returned to the railway, Flor remained in the position of acting railway CEO. Flor and Elmalich did not participate in the tender for the CEO position - neither in the first tender that ended without finding a suitable candidate nor in the current tender, in which the search committee is still trying to recruit candidates from the private market. Recently, Flor was appointed chairman of the railway board of directors and Elmalich regained the position of acting CEO, after the Dotan committee disqualified the railway's previous candidate, the VP of Passengers at Israel Railways, Yaakov Marciano, claiming that he does not have enough experience.