In a letter to Prime Minister Benjamin Netanyahu, El Al Israel Airlines Ltd. (TASE: ELAL) CEO Gonen Usishkin has responded to the Ministry of Finance's demands for guaranteeing a loan to the troubled airline. He said that the demands were impossible to implement and that their aim is to ensure the carrier goes into liquidation.
Earlier this week, the Ministry of Finance agreed to provide government guarantees for up to 80% of the $400 million in bank loans that El Al wants to take in order to survive the crisis. However, the Ministry of Finance makes these guarantees contingent on $50 million additional streamlining (above and beyond firing 33% of its work force), a signed agreement with the workers committee for all this including foregoing free flights for employees and their families, and pay cuts. The owners are being told to inject NIS 100 million into the airline, and the banks must delay repayments of existing loans to El Al.
In his letter, Usishkin asks Netanyahu to urgently intervene on the matter and details that the latest demands have come after El Al already presented a streamlining plan. "As part of the plan everybody carries the burden - the El Al employees, the controlling shareholders agreed to put a lien on shares for the state guarantees and inject capital into the company, the Histadrut and business partners for an unprecedented amount of more than NIS 1.5 billion per year for seven years and an accumulative over NIS 10 billion for the period of the loan."
He added, "As prime minister you carry the highest responsibility if after 72 years El Al ends its journey on your watch. Therefore, we ask that you don't take a decision without giving us the chance of presenting to you the outcome of the Ministry of Finance's new demands."
El Al is aware that the Ministry of Finance is not alarmed at the prospect of the airline being liquidated. He wrote to Netanyahu. "The significance of a decision to liquidate El Al is the loss of the State of Israel's independent airline. Israel would become a besieged island subject to extortion from foreign airlines or foreign countries whose interests are different from the State of Israel."
Before the crisis, El Al had less than a 25% market share in flights to and from Israel.
Usishkin writes, "The Ministry of Finance's decision would mean that the 10,000 households that earn their livelihood from El Al would have the danger of unemployment hovering above them while another 30,000 households would be indirectly affected. In accordance with the demands of the Ministry of Finance we prepared a business plan that ensures that El Al would cope with the challenges the day after the coronavirus."
Usishkin also mentioned that liquidation would make it difficult to refund the more than NIS 1 billion that El Al owes customers for cancelled flights. He also insisted that El Al has reached its current situation through no fault of its own and is being unfairly blamed for its troubles by Ministry of Finance officials. He also reminded Netanyahu that it was Israel that decided to close its skies.
Published by Globes, Israel business news - www.globes-online.com - on May 13, 2020
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