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El Al Suspends Operations Indefinitely
El Al Israel Airlines has canceled all flights and suspended operations indefinitely. All flights, including passenger and cargo services, have been stopped. The announcement comes as the carrier reported massive losses over the first half of 2020 and after the airline’s pilots refused to fly amid a labor crisis.
El Al’s CEO, Gonen Usiskhin, ordered all of the company’s aircraft to return to Israel. The airline was planning to operate flights to Paris on Tuesday night and to New York on Wednesday before the cancelations were announced. While passengers originating in Tel Aviv have been rebooked onto other airlines, the airline has reportedly neglected to refund or rebook certain passengers in the United States, generating complaints with the U.S. Department of Transport against the airline.
The Israeli flag carrier had in March already suspended regular services until at least July 31. But it had added cargo operations and kept some special services to stay in the air and retain a fraction of its workforce.
Before shutting down operations completely, Tel Aviv had planned on operating to specific cities with special reroutes and new schedules throughout July, per its website. The airline would have operated a Tel Aviv-Paris-London-Tel Aviv routing on Sundays and Thursdays starting July 2, and it would have added flights exclusively to Paris on Tuesday from July 1.
El Al would have flown outbound to Los Angeles on Fridays and back to Tel Aviv on Sundays from July 10 to Aug. 2, and it would have flown to New York with outbound and return services on alternating days from July 2 to July 30. But now none of those flights will be operating for the foreseeable future.
El Al lost $140 million, or half a billion NIS, in the first quarter of 2020 alone, the company reported on Tuesday. The reported period for these losses is January to April, only about half of which time was affected by coronavirus shutdowns. With additional losses from the second quarter expected to pile up, especially with greater coronavirus impacts, the coronavirus crisis has delt the already-ailing airline a major blow.
Airline revenue dropped 25% to $321 million due to the pandemic after foreigners were banned from entering Israel and returning nationals required to enter a 14-day quarantine. Operating losses grew 75% to $93 million.
One important aspect that El Al is missing out on is the dropping price of oil. While for many airlines around the world the cheaper oil is a welcome bonus that is reducing losses and potentially keeping carriers afloat, El Al CFO Dganit Palti said that declining oil prices actually exacerbated El Al’s loss because of hedging deals on fuel no longer considered effective, per Globes News.
El Al is working on receiving state aid to keep operating, but it needs agreement from its employees, and their unions, in order to finalize any deal; it says that two offers are currently on the table. Israel’s government maintains that El Al’s problems have been around long before the pandemic, pointing to a bloated workforce, high salaries and a weak balance sheet.
“The scope of the coronavirus crisis is something we have never seen, and no airline, no matter how strong, can survive without government assistance,” said Usishkin.
As financial losses piled up, the company’s pilot union says that El Al has failed to meet its obligations. The dispute was heightened by El Al’s refusal to transfer 30 Boeing 737 pilots to Boeing’s larger 787 Dreamliner, per Haaretz, a commitment the airline had already made.
Retraining pilots from the 737NG to the Dreamliner, which, unlike the MAX/Dreamliner pair, do not share many similar operating systems, would be expensive for El Al and would have added significant losses. Pilots would have needed time in simulators, which would have required 787 training pilots to be paid as well, and Dreamliners would have needed to be inspected before flight should they have been pulled out of service, adding additional costs.
While El Al might have been able to boost revenue with Dreamliner cargo or special passenger flights, that extra money would probably not have canceled out extra training or maintenance fees, let alone gas or takeoff and landing charges at airports.
“[Since] the administration of the company did not even respect the agreements that were signed with the union less than a month ago, the union had no choice but to arrive to the conclusion that the owners of the company are unable to save it from its situation,” the union said in announcing its work halt, per KAN news.
“El Al’s pilots strongly demand that the board of directors fulfill their legal obligation and accept the Ministry of Finance plan to loan it $250 million,” the pilots added. “The Ministry of Finance plan will improve the capital structure of the country more than a $400 million (bank) loan, which would only worsen the company’s situation with no economic justification behind it other than protecting the controlling owners.”
“El Al’s pilots will not be reconciled with a decision that prefers the benefit of the controlling owners over the benefit of the company, its customers and its employees,” the pilots concluded.
Since the Coronavirus crisis began, only about 100 pilots have continued work at El Al, while the rest have been on unpaid leave. The unpaid leave caused the pilots’ annual salaries to plummet, adding to the tension between the union and airline management.
Since El Al has suspended all its operations, the pilots that had remained on payroll will also be placed on unpaid leave. The carrier has also canceled some leases and returned a number of leased aircraft. It has given up rights to five Boeing 737-800s, and it reached a sale-and-lease-back agreement with a foreign company for an additional three 737-800s.
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