El Al begins long flight to recovery

El Al

Controlling shareholder Eli Rozenberg must cope with Covid-19, refunding passengers, raising loans, implementing layoffs and competition from Emirates and Etihad.

Eli Rozenberg, 26, the new controlling shareholder of El Al Israel Airlines Ltd. (TASE: ELAL) won't have a moment to rest now that the New Year holiday is over. Before the holiday, he bought a controlling 43% stake in the financially troubled airline for $100 million in the company's public offering.

Although El Al raised $150 million, Rozenberg, the son of New York-based businessman Kenny Rozenberg, knows that the money invested so far will likely not be enough to get El Al back in the black.

Even before the Covid-19 crisis, El Al was losing money, and it remains unclear when the pandemic will begin to fade and people will start flying again in large numbers.

The first hurdle that Rozenberg must negotiate is raising $250 million in loans for which the Israeli government has agreed to give a 75% guarantee. So far no banks have agreed to extend the loan.

At the same time, after October 1 El Al will be required by law to repay an estimated NIS 1 billion paid by passengers for flights that were cancelled. As part of this challenge, El Al will also be required to restore its credibility in the eyes of passengers. Since March, El Al has not provided any customer service to these passengers who have had to make do with an automatic recording telling them that their claims will be dealt with when the airline resumes operations. This even though most foreign airlines and Israir Airlines and Tourism Ltd. have continued operating.

In repairing the damage to its reputation, El Al will need to take into account that in the post-Covid 19 aviation arena in Israel, competition will be even more challenging, particularly from the UAE's Emirates and Etihad Airways who will enter the Israeli market and fiercely compete with El Al on routes to East Asia.

Another front fraught with problems for El Al is with its employees. El Al management signed an agreement with the various workers committees to lay off one third of the company's 6,300 employees, as part of the terms for government assistance. But the pilots claim that the agreement signed by the Histadrut (General Federation of Labor in Israel) was signed without their consent.

El Al has announced that it is resuming operations today with cargo flights while passenger flights will restart next month. Most employees will remain on unpaid leave until at least October 31. The pilots have shown in the past that they can disrupt El Al's schedules with sanctions if their demands are not met. If Rozenberg cannot get the pilots behind him, then the disquiet could quickly spread to all El Al's employees who have been sitting at home for the past six months.

Published by Globes, Israel business news - en.globes.co.il - on September 21, 2020

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

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