Government nixes national airline’s initial request that it guarantee a $400 million loan as negotiations continue for hammering out terms of emergency financing.
By Paul Shindman, World Israel News
The government turned down a request by El Al Airlines that Israel’s finance ministry guarantee 80 percent of a $400 million bank loan the national carrier is seeking, The Marker reported Thursday.
The complicated multifront negotiations to help out Israel’s national airline is hung up on government demands that El Al cut back its payroll and bank demands that El Al put up shares in the company as collateral.
El Al must sign a loan agreement and secure the company’s financing for the next 12 months to avoid being forced to issue a warning in its 2019 financial statements, due to be published April 30, the report said. Such a warning could have a dramatic effect on the company’s stock price.
The finance ministry wants guarantees that foreign banks that financed new aircraft purchases would not take unilateral steps once the state guarantees the loan.
The ministry also wants El Al to slash beyond the 30 percent of its work force previously agreed to. However, the El Al employee union called on Prime Minister Benjamin Netanyahu to intervene and cancel the layoff plans. Labor representative Sharon Ben Yitzhak said before the March 2 elections Netanyahu promised he would not let El Al collapse and called for significant management wage cuts to save jobs.
Faced with massive cancellations, El Al laid off 80 percent of its workforce in March. The company kept flying with emergency charter flights to repatriate Israeli travelers who had been stranded around the world as countries closed their borders to stop the spread of the coronavirus.
On Wednesday, El Al announced it had signed a deal with global logistics giant Kuehne and Nagel for 150 cargo flights between now and October from China to Italy via Israel to transport medical equipment for the war on the coronavirus.
El Al’s cargo division will convert two Boeing 777 passenger planes to cargo use and fly goods twice daily with the return flights passing through England, France, Germany, Holland and Switzerland en route to Ben Gurion Airport in Israel.
Earlier this week United Airlines and British Airways announced they intend to restart some flights to Israel in May, with Air Canada saying regular flights will resume in June.
United has been operating regular Tel Aviv-New York flights throughout the coronavirus pandemic and will increase the New York route and resume return flights to San Francisco.