Coronavirus: Israel to demand changes at flag carrier before granting $400m bailout loan
The Israeli government will demand that El Al Israel Airlines carry out an overhaul, including layoffs, before agreeing to throw a lifeline to the cash-strapped airline, officials said on Sunday.
El Al, Israel’s flag carrier, is seeking state-backed loans of $400m to help it through the coronavirus crisis, as foreigners are barred from entering the country and incoming Israelis must enter quarantine, Reuters said.
Last week, El Al said that it was postponing the restart of passenger flights to 30 May, according to the Globes website.
El Al said: “Due to the fact that the relaxation published by the Ministry of Health on May 4 did not include a relaxation on the obligation to isolate for incoming passengers to Israel and the prohibition of foreigners entering Israel and due to the low demand for passenger flights, the company has decided to extend the temporary break in flights until May 30.”
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About 6,000 of the airline’s workers are on unpaid leave until 30 June.
Still, the government argues that the airline’s problems, including a bloated workforce, high salaries and a weak balance sheet, began well before the Covid-19 outbreak.
Cabinet ministers and senior Finance Ministry officials drafted a plan late Sunday to help them feel confident the company would be able to repay the loan.
The next step is to present the proposal to the airline, according to a ministry spokesman.
El Al declined to comment, Reuters said.
One source close to the talks said the government demands included a cash injection into the airline of $28.5m by its main shareholders, a commitment to reduce its workforce, and also the state receiving a stake in the company.
El Al’s biggest shareholder is Knafaim Holdings, which is controlled by one family. Knafaim could not be immediately reached for comment, according to Reuters.
Workers opposing layoffs held a protest outside the ministry on Sunday.
El Al has presented its own plan that includes an unknown number of layoffs, according to the ministry. Any layoffs would require approval by the airline’s union, but this is yet to happen, an El Al spokesman said earlier in the day.
A spokesman for Finance Minister Moshe Kahlon rejected Israeli media reports that the minister was considering dissolving El Al, which has twice delayed publishing fourth-quarter financial results.
The airline said last month it was in advanced talks with an Israeli bank to receive a loan that will be partly backed by government guarantees. Source