El Al Israel Airlines Ltd. (TASE: ELAL) continues to move forward with its Boeing Dreamliner airplane purchase mega-deal worth $1.025 billion. On Monday, the company reported signing a sale and lease back agreement with an undisclosed foreign company for two of the 787-8 planes purchased from Boeing.
Once Boeing delivers the airplanes, they will be sold to the foreign company and leased back to El Al, which announced that this agreement is not expected to a have any material financial effect and that the deal could be terminated under certain conditions. El Al has also signed a 787-9 lease deal with the same company and is expected to lease four Boeing Dreamliner airplanes for 12 years, with the option of stopping the lease on some of them after 10 years. Two of the airplanes are to be delivered to El Al in 2018 and two more in December 2019 and August 2020.
This deal with Boeing, which El Al CEO David Maimon CEO has called, "The largest procurement plan in El Al history," comprises the purchase of 16 787-7 and 787-9 Dreamliner planes, motors and spare parts. The payment for each plane will be provided upon handover to the company, excluding an advance payment provided earlier on, under the terms of the deal.
In March, El Al published a request for proposals for financing entities, for the funding of advance payment for three planes it owns and is expected to receive in 2018, but has not yet provided any updates on this issue.
In June, the airline offered several companies to buy its Boeing 747-400 fleet, as part of preparations for the receipt of the Dreamliners, and has been examining the proposals received.
In the past few months, El Al, controlled by Knafaim Holdings Ltd. (TASE: KNFM), held by spouses Tami and Dedi Borovich and Poju Zabludowicz, has been enjoying the slump in global oil prices. Last month, it reported its results for the first half of 2016, with a net profit of almost $14 million, after making a profit of slightly more than $1 million in the corresponding half in 2015. Its semi-annual revenue remained stable, at $934 million.
Following these strong results, El Al share prices have soared 125% in the last year, reflecting a market cap of NIS 1.7 billion. In the past three years, El Al shares had the second highest return on the stock exchange (second only to electric appliance importer Tadiran Appliances Ltd.), shooting up 740%.
Published by Globes [online], Israel business news - www.globes-online.com - on September 14, 2016
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