Massive bailout to save Israel’s national airline will put the majority of shares in government hands, but a third of El Al’s employees are expected to lose their jobs.
By Paul Shindman, World Israel News
Share prices in El Al Airlines shot up 17 percent Tuesday in opening trading on the Tel Aviv Stock Exchange after the company accepted a bailout to save it from bankruptcy due to the coronavirus pandemic.
The worldwide pandemic that is crushing the international travel industry has hit the airline hard. El Al has laid off 95 percent of its workers. With almost the entire passenger schedule shut down and no cash left to pay its bills, the airline stopped operating flights by Sunday.
On Monday, El Al’s board of directors agreed to accept the Finance Ministry deal under which it will receive a 75 percent state-guaranteed $250 million loan, Globes reported. El Al will also offer $150 million in new shares on the Tel Aviv Stock Exchange and any shares not bought by the public will be purchased by the government.
If the public does not buy enough shares and the state ends up with a controlling stake, a trustee will be appointed to run the company for three years. It’s not expected that the public will snap up enough shares, putting the airline in government hands.
“The first step was taken to return El Al to the runway,” Transportation Minister Miri Regev said. “We will work to assist the company during the interim period as is needed with the goal of protecting Israel’s aviation independence.”
The company’s entire fleet of 45 aircraft was grounded on the weekend and passengers whose flights were canceled due to the pandemic are owed $350 million in refunds. El Al is not alone in owing passengers as American air carriers have no way to pay refunds and instead have given out $10 billion in vouchers due to the pandemic, Forbes reported.
The bailout returns El Al to the point it was more than 15 years ago when the government privatized the airline – a decision by Benjamin Netanyahu who was then finance minister. Faced with high security costs to prevent terror attacks and stiff competition after bargain airlines were allowed to start flying to Israel, the company has been struggling financially for several years.
El Al has shown in the past that it has strategic importance to the country, not just in repatriating Israelis during the coronavirus pandemic, but also in times of war when it has brought home thousands of reserve soldiers and transported thousands of tons of vital supplies.