The privatization of Israel’s national carrier, El Al Israel Airlines, began in June 2003. Now, following the critical damages sustained by the coronavirus pandemic, including a government ban on flights and the quarantine requirements of arrivals, the company announced it was $400 million in a hole and had to receive massive investments, either through bank loans guaranteed by the Israeli government, or by issuing stocks, or by a combination of both.
On Monday, Keren Turner-Eyal, Director General of Israel’s Finance Ministry, sent El Al a letter stating the loan guarantee they were seeking is now reduced to $250 million, which means the company would have to get the remaining $150 million it needs to get out of the hole by issuing new stocks. The government is even prepared to purchase every stock El Al could not sell, at the stock’s average price in May 2020.
And that’s the rub: on paper, as of May, El Al is barely worth $95 million, having sustained more losses than some small countries. Which means that, whichever way one looks at it, El Al is probably going to be owned by the Israeli government, especially if those stocks remain on the shelf due to a lack of interest on the part of investors.
El Al has yet to approve the Finance Ministry’s offer, which would affect workers’ benefits and entail layoffs of an estimated 2,000 employees. El Al may also have to return some of its recently purchased Boeing 787 Dreamliners and make a significant reduction in the size of the fleet. It will also be forced to give up its less profitable destinations such as Manchester, Las Vegas and Tokyo. All in all, the company will have to stick to an annual reduction of $50 million in its expenses.
Finally, the Finance Ministry demands a salary reduction across the board of El Al’s management and Board of Directors, as well as taking away their privileges such as free flights in Business and First Class. It would be like working for a company that doesn’t operate a fleet of long distance aircraft.