Nationalizing El Al ‘not on agenda,’ says Finance Ministry official
United Airlines to renew San Francisco-Tel Aviv flights on July 10
The renationalization of struggling Israeli airline El Al is “not on the agenda,” a senior Finance Ministry official said Wednesday, even if the state acquires a majority of shares in the carrier as part of a proposed bailout deal.
According to a revised rescue proposal received by El Al management on Sunday, the government is willing to offer a $250 million loan to the flag carrier.
In addition, El Al will issue shares worth $150m., backed by a government guarantee to purchase shares that are left unsold. The agreement ultimately could see the state acquiring approximately 60% of the company’s shares and becoming the majority shareholder.
Speaking to the Knesset Economic Affairs Committee, Finance Ministry economist Eli Morgenstern dismissed the possibility of the state taking permanent control of El Al after 16 years of private ownership.
“I don’t think there is anyone who thinks that the state should be the owner of an airline, so the idea of nationalization is not on the agenda,” he said. “The shares will be transferred to a trustee for a period of three to five years, at the end of which he will sell them. Following the cash flow, the company will find it easier to receive a loan for the remaining $250 million.”
While El Al executives are expected to hold discussions regarding the Finance Ministry’s revised plan to bail out the airline this week, any agreement will require the approval of an Israeli bank, the El Al workers union, the government and the Knesset Finance Committee.
“We know we are headed down a new road,” Avi Edri, head of the Histadrut labor federation’s transportation union, told Reuters on Wednesday. “It doesn’t matter if it’s a government or private company. We know we will have to let a number of workers go.”
The revised rescue plan is conditional upon severe cost-cutting measures and layoffs expected to affect one-third of the airline’s 6,500-strong workforce.
It also represents a significant shift in strategy following four months of unsuccessful negotiations between El Al and the Finance Ministry for a $400m. government-backed loan to bail out the battered company.
El Al CEO Gonen Usishkin also addressed the Knesset committee, warning that the carrier will be unable to emerge from the coronavirus crisis unless it receives government assistance like “all other airlines in the world.”
Earlier this week, El Al said it would extend the unpaid leave of 5,800 staff members until July 31, and all scheduled flights would be grounded until June 30, except for cargo and one-off services.
Demonstrating the scope of the blow suffered by Israel’s aviation industry amid the coronavirus pandemic,
Ben-Gurion Airport this week published data showing a 99% drop in international passenger foot traffic last month compared with May 2019.
Only 18,197 international passengers passed through Israel’s leading transportation hub last month, compared with about 1.93 million in May 2019.
Plunging foot traffic comes amid a ban on all foreign nationals entering Israel since March 18, even if they can prove their ability to remain in home isolation for 14 days upon arrival. The entry ban is currently valid until June 15.
Meanwhile, United Airlines became the latest in a string of international airlines to announce the renewal of additional flights to Israel. The carrier will recommence flights three times a week between Ben-Gurion Airport and San
Francisco International Airport on July 10.
Despite the drop in passenger demand resulting from the coronavirus pandemic, United was one of the few airlines that continued flights to Ben-Gurion Airport, operating a daily route to Newark Liberty International Airport.
“We are delighted to renew the route to San Francisco, which is significant news primarily for the hi-tech industry and business community,” United Airlines Israel managing director Avi Friedman said. “As always, we are proud to offer excellent, direct and convenient service to the West Coast of the United States, while maintaining the highest level of cleanliness in the aviation industry for the safety of our customers and employees.”