Fourteen months after the operations of airlines ground to a halt at the start of the Covid-19 pandemic, Israel's cabinet have approved an assistance package for El Al Israel Airlines Ltd. (TASE: ELAL), "following the coronavirus crisis and the exceptional damage to Israel's aviation industry."
As part of the agreement, the state will buy airline tickets for airline security staff for the next 20 years at a significant discount and will pay $210 million. Government foot dragging on reaching this agreement has meant that El Al has still been unable to refund many of the passengers who bought tickets for cancelled flights over the past year and two months.
At the same time El Al has committed to raise another $105 million in capital on the Tel Aviv Stock Exchange (TASE), with controlling shareholder Eli Rozenberg committed to buying $43 million of the shares. El Al has also committed to implement the streamlining program to lay off 1,600 of its 6,000 employees, which will reflect savings of $400 million in the coming few years.
The Ministry of Finance had originally agreed to provide 82.5% state guarantees for $300 million in bank loans but changed course because of the higher than expected interest rate terms that the banks were demanding.
With the $210 million that El Al is now receiving from the state, the airline has committed to pay its debts to suppliers and customers.
The cabinet has also approved similar packages for Israir Airlines and Tourism Ltd. and Arkia Airlines Ltd.. Israir will receive $16 million for flights for security personnel over the next 20 years. Israir has also agreed, as part of the government aid package, to lease two of its wide-bodies jets and raise $8 million in capital on the TASE by October 2021. In the event that Israir does not hold the IPO on time, then parent company BGI Investments (1961) Ltd. (TASE: BGI), controlled by Rami Levy and Shalom Haim, will be required to inject the capital until such an offering is held.
All the airlines have committed not to pay dividends to shareholders for at least five years.
Published by Globes, Israel business news - en.globes.co.il - on May 10, 2021
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