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El Al has returned multiple planes to lessors after cutting all of its services. The airline is negotiating with its government and unions to accept a state aid package. (Photo: AirlineGeeks | William Derrickson)

El Al Israel Airlines Agrees to Taking Government Assistance

Just days after announcing they would be indefinitely suspending all operations, El Al Israel Airlines agreed to become nationalized. This development is part of a plan regarding a bailout for the airline that has had significant financial struggles due to the COVID-19 pandemic.

The Israel-based carrier and its controlling shareholder Knafaim Holdings had been in discussion with the Israel Ministry of Finance for a bailout as they faced significant financial losses due to the lack of travel demand associated with the coronavirus crisis. Knafaim Holdings has been in control for nearly 15 years, with husband and wife duo, David Borowitz and Tami Moses Borowitz owning nearly 33% of the airline’s shares.

The plan, which was accepted by El Al’s board of directors, includes a 75% guarantee for a $250 million loan. The deal, provided by the Ministry of Finance, also includes that the airline must issue $150 million in shares on the Tel Aviv Stock Exchange. 

According to Globes Israel, any shares that are not purchased by the public will be bought by the Israeli government. After all shares are purchased, if the state has a controlling stake, they will then appoint a trustee to the company for a three-year span.

This is a significant change of plans from what was originally proposed by the current ownership group in which the government would provide 82.5% guarantees on a $400 million loan. There also would have been a 150 million Israeli new shekel (about $43 million) injection by the owners.

While the plan has been approved by the airline’s board of directors, different unions associated with working groups within the airline will also have to sign off on the deal, which includes significant cost-cutting measures. These measures include cutting nearly a third of the airline’s employees. The bailout is also subject to parliamentary approval.

Globes also reported that the El Al Pilots Committee had already voiced support for the Ministry of Finance plan as they favor nationalization rather than financial uncertainty that would come with the current ownership. 

In a quote to the Associated Press, Transportation Minister Miri Regev said, “This evening the first step was taken to return El Al to the runway. We will work to assist the company during the interim as is needed with the aim of protecting Israel’s aviation independence”. 

The Regions Other Airlines

El Al Israel is not the first airline in the Middle East and Northern Africa that has needed a bailout due to financial difficulties. EgyptAir announced in May that they would be receiving a $127 million loan from the Egyptian government.

In April, Royal Jordanian announced that they had enough cash to last them to the end of June.  Last week it was reported by Bloomberg that the airline had asked the government of Jordan for financial assistance to help weather the storm.

So far, other Middle Eastern giants such as Emirates, Etihad, and Qatar Airways have not received any known government assistance during the financially difficult times. However, like most airlines across the world, they have had to significantly cut salaries and staff members.

Jace Moseley
Jace Moseley
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