El Al Airline workers protest against proposed layoffs due to the coronavirus economic crisis, May 10, 2020. (Flash90/Olivier Fitoussi)
To stave off bankruptcy, the Finance Ministry will guarantee a $72 million loan to El Al while the company issues $43 million in new shares that the government will buy if nobody else does.
By Paul Shindman, World Israel News
The Finance Ministry on Sunday announced a proposed bailout for the financially strapped El Al Airlines that could see the government become a major shareholder.
The ministry will give Israel’s national airline a $250 million loan instead of the $400 million it was asking for, Globes reported. The remaining $150 will be raised by selling new shares in the company on the Tel Aviv Stock Exchange. If the shares don’t sell because of fears by buyers that the airline could face further problems if the coronavirus pandemic does not end, then the government will commit to buying any shares not purchased by the public.
El Al’s major shareholder, Knafaim Holding Ltd. which also owns and leases airliners internationally and provides airport services, is not expected to buy any of the new shares. Their stake in El Al may end up be diluted to the point that the government might end up gaining control of the airline.
In a scenario where none of El Al’s current shareholders exercise their rights to buy shares in the offering, the state’s stake in the company will reach 61.3%, The Marker reported.
El Al notified the Tel Aviv stock exchange of the Finance Ministry’s offer. However, the deal still has to be passed by the Knesset Finance Committee and the government before being voted on by El Al shareholders.
The new arrangement would also require El Al and its employees to sign a new collective labor agreement that would include major cutbacks. With the tourism industry totally shut down in the pandemic, the airline took drastic action in March by laying off 80 percent of its 6,300 employees.
El Al has shared the same fate as many airlines around the world, which are on the verge of collapse due to losing up to 95 percent of their business because of the coronavirus pandemic that has ground international travel to a near-standstill.
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