The dismal financial position of El Al Israel Airlines Ltd. (TASE: ELAL) is obvious from its first quarter financials released yesterday evening. The company posted a $140 million loss for the quarter, over 150% higher than the $55 million loss in the first quarter of 2019, and its reports continue to bear a going concern qualification by the company's auditors, who point out that in order to continue in business, it will need a substantial injection of cash.
At stake is an amount of $400 million over which El Al has been conducting negotiations on two possible formats: receiving the entire sum as a loan mostly backed by a state guarantee, or a state guaranteed loan of $250 million and an equity offering of $150 million, also with state backing.
Because of the coronavirus outbreak, the airline, controlled by Tamar (Tami) and David Borovitz and headed by CEO Gonen Usishkin, saw its revenue shrink by 25% to $321 million in the first quarter. Its operating loss grew 75% to $93 million.
El Al CFO Dganit Palti pointed out that the decline in the price of oil, which would normally have been welcome, also exacerbated the loss, because of hedging deals on fuel no longer recognized as effective. The company recorded an expense of $56 million relating to these deals.
El Al stopped flying in March, and the financials relate to January-April, meaning that only half the period was affected by the coronavirus pandemic. Passenger numbers are anyway low in winter, but the first two months covered by the report were before the pandemic, and the loss is therefore not just a consequence of that. In May, El Al released 2019 financials showing a $60 million loss for the year, following a loss of $52 million in 2018.
El Al's share price has dropped 40% so far this year, giving the airline a market cap of about NIS 280 million.
Published by Globes, Israel business news - en.globes.co.il - on July 1, 2020
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