FM proposes El Al bailout offer, many strings attached
The Finance Ministry agreed to back a government-secured loan of $400 million to bail out flag carrier El Al late on Sunday, but the deal will be conditional on a series of cost-cutting measures and layoffs.
On Monday morning, however, El Al told the Tel Aviv Stock Exchange that it had not yet received a formal copy of the Finance Ministry’s proposal.
For the struggling airline to secure the 80% government guarantee for the $400m. loan, its owners will reportedly be required to inject NIS 100m. ($28.5m.) into the airline’s operations, reach an agreement with a commercial bank to provide the loan, implement cost-cutting measures valued at $50m. per year, and secure the agreement of workers’ representatives to layoffs expected to affect 2,000 workers – approximately one-third of the workforce.
The tentative approval followed a Sunday evening meeting between Finance Minister Moshe Kahlon, Transportation Minister Bezalel Smotrich, Tourism Minister Yariv Levin and senior finance officials as they evaluated several options regarding the future of the airline battered by the coronavirus pandemic.
“The state wants to provide loans and guarantees, but cannot give money just to postpone the collapse of El Al by three months,” Smotrich told KAN Radio on Monday morning. “We presented an organized plan, in which the company still needs to take steps.”
The “remainder of the discussions will be carried out with the company,” the Finance Ministry said following the conclusion of the meeting. Speaking to Reuters, a spokesman for
Kahlon denied media reports that the government was considering dissolving El Al.
Should the Finance Ministry reach an agreement with El Al management, reaching a similar accord with El Al workers may yet prove challenging.
“The Finance Ministry’s plan does not make sense, their demands from us keep increasing on every occasion,” El Al workers union chairman Sharon Ben-Yitzhak told Army Radio on Monday. “We are trying to change the disk and obtain coronavirus grants for El
Al employees too.”
Last week, El Al said it would extend its halt on all scheduled commercial flights to and from Israel until May 30, citing new measures announced by the Health Ministry, which did not include lifting the requirement on self-quarantine for passengers arriving in Israel or enabling non-citizens to enter the country.
El Al also extended the unpaid leave of thousands of employees until June 30. About 6,000 employees of El Al and its subsidiaries are currently on unpaid leave.
In a letter to employees, El Al CEO Gonen Usishkin said that bringing back employees from unpaid leave at a later date will be gradual and in line with the growth of the company’s commercial activities. That will only be possible, he cautioned, should the airline receive the government-secured loan it is currently negotiating.
“The economic damage that we have sustained, even though it originated from the virus and not due to our business operations, requires us to take painful steps to survive the crisis and during the years that follow,” Usishkin said. “We will need to be more efficient, accurate, creative and flexible in our operations.”