As though the challenges posed by the price of fuel, exchange rates, and competition were not enough, from time to time El Al Israel Airlines Ltd. (TASE: ELAL) also suffers financial damage from lawsuits against it. The company reported this morning that as part of a settlement of a lawsuit filed against it in 2007 in the US, it will pay the plaintiffs a total of $15.8 million, an amount it had already made a provision for in its financials, but had not yet actually paid.
In February 2007, a civil suit was filed against El Al and 38 other airlines by various entities that purchased cargo services from the airlines in 2000-2006, during most of which period El Al was still a state-owned company.
The plaintiffs alleged that the airlines colluded on prices of air transport services, in violation of antitrust laws and other laws in Europe and the US.
Yesterday, the parties signed a settlement, whereby El Al will pay to the plaintiffs a total of $15.8 million, to be paid in six installments. The first payment, of $9.8 million is to be paid within 30 days of the signing of the settlement. The balance of $6 million will be paid in five equal installments of $1.2 million by the end of 2016.
It was also agreed between the parties that the settlement shall not be construed as an admission by El Al of the claims against it or as evidence of their correctness. As mentioned, El Al has already provided against the claim, so that the settlement will not affect its income statement, but only its cash flow.
At the end of the third quarter, outstanding claims against El Al totaled $147 million, against which the company has made provisions totaling $19.1 million.
The main claim is a suit filed in January 2007 for $136 million, concerning the collection of an $8 security fee for code-share flights.
This claim was rejected once by the lower court, but the plaintiffs lodged an appeal that has not yet been heard, and El Al has made no provision against it. Besides the current lawsuit that El Al reported to the stock exchange, there are no outstanding claims against the company that could materially affect its financials.
Published by Globes [online], Israel business news - www.globes-online.com - on December 28, 2011
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