There's no bank loan, not many flights - and so there's a furlough extension. El Al Israel Airlines Ltd. (TASE: ELAL) notified employees today of an extension of unpaid leave until December 31. 5,074 employees of the airline and its subsidiaries are on enforced leave, most of them since March. In its notice, El Al states that "the gradual return of employees from unpaid leave will be in accordance with the scope of planned flights."
El Al recently announced the restoration of flights to Brussels, Moscow and Newark. Nevertheless, its activity is at a very low level. In October, El Al carried 21,500 passengers, which accounts for less than 10% of all passenger traffic through Tel Aviv's Ben Gurion Airport last month, and is 95% down from its passenger numbers in October last year, when it carried almost 485,000 of them.
El Al is in the midst of a stormy period. In a few weeks' time, its CEO Gonen Usishkin will step down. The new board of directors appointed following the change in control of the airline is meant to find a replacement. The task that the board has so far failed in is finding an entity that will extend a loan 75% guaranteed by the state. Under the plan agreed between El Al and the Ministry of Finance, the loan is meant to be $250 million.
El Al asked the Ministry of Finance to increase the state guarantee to 82.5%, but was refused. What is clear to El Al's management is that the amount of the planned loan is insufficient for a company whose debts are mounting and whose revenue is low because of the fact that people are not traveling. It looks as though the company will turn to raising debt via a bond offering, unless at least one bank can be found wiling to extend it a loan.
What is more, until El Al implements the financial aid plan, its four agreements with its workers committees will not come into force. These agreements include streamlining clauses to which the airline is committed, involving the dismissal of about one third of its workforce and salary cuts.
El Al's pilots recently filed an appeal in the National Labor Court against the labor agreement concerning them reached with El Al over their heads by the Histadrut (General Federation of Labor in Israel). The Regional Labor Court dismissed the appeal against the agreement, which calls for a permanent 29% cut in the pilots' pay. The pilots now hope to find an attentive ear in the National Court. They had hoped for a conciliatory dialogue with the new controlling shareholder, Eli Rozenberg, and an improved agreement from their point of view, but, like El Al's other workers, they have not met Rozenberg at all.
Published by Globes, Israel business news - en.globes.co.il - on November 23, 2020
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