The three Israeli airlines are asking for hundreds of millions in state loans to enable them to keep afloat.
By Batya Jerenberg, World Israel News
All three Israeli airlines have asked the government for emergency loans to help them survive until the coronavirus pandemic eases and air travel resumes, saying that the longer the delay, the more likely it will be that one or more will go under.
The largest of them, El Al, has requested $400 million in loans and another $200 million in guarantees. At the same time, it provided the Finance Ministry with a recovery plan that will include layoffs and cutbacks in workers’ benefits to make the airline more cost-efficient going forward.
In a letter to employees last week, El Al CEO Gonen Usishkin wrote that the alternative to the loan “is the airline’s collapse and the loss of its NIS 2.5 billion contribution to GDP, its professional experience and commercial ties, the aviation rights that took years to accumulate, and especially the heavy costs, amounting to billions of dollars, merely to recreate the air fleet, eventually reaching a risky process of attaining a capability similar to that which currently exists.”
On March 1, Prime Minister Benjamin Netanyahu told the company’s workers’ committee chairman that he had instructed a ministerial committee to help El Al and the two smaller airlines, Arkia and Israir.
El Al Chairman Eli Defes said on Sunday that the Finance Ministry has yet to answer their call for help.
“All over the world, they’re giving billions upon billions to their airlines. We submitted a streamlining plan two weeks ago and they haven’t reacted to it. Even if they will react positively but late, it could already be irrelevant,” Defes said.
Aviation experts say that El Al is six weeks away from collapse, according to an Israel Hayom report.
Arkia and Israir, which fly mainly domestic and the shorter, European routes, are also in financial trouble. The smaller companies are asking for state loans of about $25 million each in order to keep afloat – or permission to merge.
“At such a time, you have to think outside the box,” Arkia owner Nakash Group’s chairman Avi Homero told Globes on Sunday.
“This is something that could save the airlines, and I don’t rule out the option that in the end, all three airlines could merge into one company,” he said. “I won’t say that this is on the table, also because of the Israel Competition Authority, but we’re talking about it between us.”
Although El Al has not been owned by the government since 2003, the state has a so-called “golden share” in the company. This gives the government special rights to activate the fleet in times of emergency.
Over recent days, at the Foreign Ministry’s behest, El Al has flown to countries such as Australia, Colombia, the Ukraine and Peru to bring back stranded Israeli tourists before – and even after – air travel was closed in those countries to prevent the spread of the coronavirus.
Usishkin’s company letter said that this put El Al on the special footing of still being Israel’s national airline.
“We’re approaching the point at which the state must decide whether it wants a national airline or whether it believes that aviation security is not an important and substantial element in national security,” he wrote.
The company announced three weeks ago that it expects a loss of $70-$90 million in the January to April period this year. The only reason the decline is not worse is that it has laid off or put on unpaid leave 85 percent of its employees and reduced other operating expenses.
A good part of El Al’s financial woes is due to its bank loans and purchase and leasing of new airplanes like the Boeing Dreamliner, whose payments must be met regardless of how many routes have been closed down.