As reported by "Globes" in January, El Al Israel Airlines Ltd. (TASE:ELAL) is seeking state approval to distribute a dividend on its profits before the end of 2025. The airline, led by CEO Dina Ben Tal Ganancia, has moved a step closer today to this goal by announcing its readiness to take on more security costs. In other words, the state will contribute slightly less to El Al's security costs.
This move is a very significant step for El Al. The state's approval of the dividend will open the door for El Al to distribute huge sums to investors, first and foremost the company's owner, Kenny Rosenberg, who acquired control of the company during the Covid pandemic.
According to El Al's announcement, the state's contribution to El Al's security expenditure will fall in the coming years, from 97.5% today to 95% next year, 94% in 2026 and 92.5% in 2029. The company also estimates that the cost to the company will be $5-10 million per year, but no more than $13 million, indexed to the Consumer Price Index (CPI) and that the ceiling will increase by $500,000 in 2028 and 2030.
The state has not permitted El Al to distribute dividends since 2017 but the airline is hoping to get the green light to do so, perhaps, market sources believe, even before it publishes its fourth quarter results in the coming days.
El Al recorded huge profits in 2024
The airline's desire to resume distributing dividends follows unprecedented profitability, due to its dominance of Israel's skies throughout the war. In the first nine months of 2024, El Al recorded a profit of more than $400 million, and is expected to end the year with a profit of about $500 million.
El Al recently reported optimistically to investors, "The company is conducting advanced negotiations with the state on the issue of reducing the company's obligations, as stipulated in additional agreements with the state in 2021-2022, including on the dividend distribution restriction. The Accountant General at the Ministry of Finance has been authorized, by government decision, to sign appendices to the agreements signed with Israeli airlines, on the purchase of flight tickets for flight attendants and aviation security system employees, regarding changing terms relating to the distribution of dividends in 2025 by the companies, and all is subject to his discretion and terms to be set, if any."
El Al also notes, "The state will make an effort to examine streamlining measures for operations of the aviation security system," and that "the parties may agree to extend the period of the agreement until December 31, 2034." In such a case, the amount of El Al's participation in security expenses will increase by an additional $1 million in 2032.
With the possibility of the state's approval for the distribution of a dividend in the company, El Al's stock has completed a jump of about 50% since the beginning of the year (and 336% over the past three years), giving a market cap of almost NIS 5.9 billion.
Published by Globes, Israel business news - en.globes.co.il - on March 3, 2025.
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