Cancelled flight refunds postponed again

El Al cargo flight  / Photo: PR

The Knesset Economic Affairs committee agreed to a postponement to October 1, although even that date is in doubt.

Once again, the Knesset Economic Affairs Committee has convened on the Aviation Law. The session held yesterday was cut short by committee chair Yakov Margi because of the absence of representatives of the Ministry of Health, the Ministry of Transport, and the Ministry of Finance.

The session was convened at the request of the Civil Aviation Authority, which sought to put back the date for refunding people who bought tickets for flights that were cancelled from August 14, the date currently stipulated, to October 1, in order to give the airlines breathing room.

Is October 1 a feasible date? Margi raised the view that it is probably not the final date, and that consumers will have to wait a long time before getting their money back. Despite all the doubts, however, it was decided that the airlines' debt to consumers will be deferred to October 1. The airlines will have to present to the Civil Aviation Authority a decline of 70% in their turnover for the second quarter of 2020 in comparison with the second quarter of 2019 in an audited report in order to qualify for permission to defer payments to customers. The upshot is that anyone waiting for a refund for a cancelled flight will have to continue to wait, in the hope that there is no further postponement.

Adv. Dan Fogelman, general counsel at El Al Israel Airlines Ltd. (TASE: ELAL), explained that by the end of August El Al is supposed to refund $60 million to Israeli customers. The deferment to October 1 will raise the sum to $80 million. The total debt to ticket holders is $270 million to date. In answer to Knesset members who questioned whether the proposed aid package to El Al of $400 million would be enough, Fogelman responded that "$150 million in an equity offering plus a $250 million loan covers it." He added that El Al had further debts.

Israir owes customers $10 million, of which it has repaid $2 million, and Arkia owes $5 million, of which it says it has also repaid $2 million.

Shaul Meridor, head of the Budgets Division at the Ministry of Finance, said that Israir and Arkia were in better shape financially than El Al. On the plan meant to aid El Al's recovery, Meridor said, "This is a plan that sends El Al to a public offering of $150 million, on top of which there will be a loan of $250 with a 75% state guarantee. This gives El Al the economic fuel to refund money to Israeli passengers and also to start working again as soon as the skies are opened, and to make changes accordingly.

"El Al's alternative, if it does not enter into this arrangement, is a stay of proceedings, in which, as far as the order of priorities among creditors is concerned, the passengers go to the back of the queue. We want to ensure that this company continues to operate and manages to meet its commitments to, among others, the passengers." Meridor said he believed that the airlines would be able pay consumers by October 1.

Commenting on the plan for opening Israel's skies, which has not been published, Ministry of Transport director general Ofer Malka said, "We are working towards reopening the skies and intend to meet the goal set by the plan. We set a date of August 16. We have asked the Ministry of Health to shorten the quarantine period, to devise special conditions for businesspeople, and conditions for capsules for organized tourist groups coming to Israel. We hope to deal with this by next week." Malka also mentioned the tender for setting up a laboratory at Tel Aviv's Ben Gurion Airport, which at best will happen in October.

Dr Asher Salmon, head of the Department of International Relations at the Ministry of Health, said, "We are ready to move ahead with a model of green countries. The plan deals with the ability of Israeli citizens to come and go without the need for quarantine or tests. The list changes every day. This is a problematic policy, because there are countries like Austria that were green and became red, and the UK, which was clearly red and which became green. Theee are currently eleven countries on the list.

"We have no desire to postpone or delay this project. We will enable citizens to undergo the obligatory test in order to fly, and will see to it that results are received within twenty-four hours. For red countries like the US this is a painful and complicated matter, and we are being cautious and sensitive. At present, the quarantine period is fourteen days, as in most OECD countries, but there are discussions on cutting it to ten days or a combination of a short quarantine period and tests. This is not an arrangement that is accepted in most of the world, but we are examining it. Further relaxations will depend on the infections situation. Every forecast we made has proved wrong."

Mk Ahmad Tibi, who sponsored the Aviation Law, opposed postponement of refunds at the expense of consumers. "We said that the consumer is not the solution to the economic distress - not that of the state, and not that of the airlines. The airlines should be rescued through direct aid from the state. I express my dissatisfaction with the ease with which it is possible to come to the Economic Affairs Committee and ask for relaxations and to hell with the citizen. No-one knows when flights will start. It is not possible to approve a postponement if we don't know when the airlines will fly again. I very much object to the measure, which is highly anti-consumer."

Meridor warned that "unless the law is amended, El Al will not be able to pay the money, which could endanger the company." And indeed, the amendment was approved after two sessions.

Published by Globes, Israel business news - en.globes.co.il - on August 12, 2020

© Copyright of Globes Publisher Itonut (1983) Ltd. 2020

El Al cargo flight  / Photo: PR
El Al cargo flight / Photo: PR
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