'Going concern' warning for El Al as liquidation looms

El Al dreamliner / Photo: Yochai Mussi

The airline has reported a $60 million loss in 2019, long before the Covid-19 crisis grounded its passenger operations.

The auditors have attached a 'going concern' warning to El Al Israel Airlines Ltd. (TASE: ELAL) in its 2019 financial results. Revenue rose to NIS 2.18 billion and passenger traffic rose 4% last year, while operational expenses fell to $1.83 billion. Nevertheless, the airline has reported a loss of $60 million for 2019, compared with a loss of $52 million for 2018 - and this long before the Covid-19 crisis hit the aviation sector, which has grounded most of El Al's fleet.

As a result, the auditors attached a 'going concern' warning to the results saying, "We draw attention to the repercussions of the spread of the coronavirus, which has resulted in a lack of demand and grounding of the company's scheduled passenger flights with uncertainty reigning on developments in Israel and worldwide about the spread of the virus and the date and pace of the passenger flight market reopening."

"Negotiations with the State and lenders continues and there is uncertainty about their completion. As the receipt of loans is essential for the company to cope with the results of the virus, there exists major doubt in the continued existence of the company as a going concern."

Fuel expenses in 2019 fell by $44 million due to the fall in world fuel prices and a reduction in the amount of fuel consumed by the newly acquired Dreamliners. Cash flow was $294 million, up from $203 million in 2018, and the cash balance at the end of 2019 was $264 million.

El Al also mentions its streamlining measures in the financial report in the wake of the virus crisis that has grounded most of its fleet. These include putting 90% of employees on unpaid leave and cutting the salaries of management and the board by 20% as well as converting some passenger planes into cargo planes.

El Al CEO Gonen Usishkin said, "El Al is one of the most significantly hit companies in the Israeli economy by the coronavirus, and therefore we turned to the government to assist El Al as has been done in most countries worldwide. In recent months, El Al's management has worked around the clock to implement a range of operational and financial measures to reduce the company's expenditure, maintain liquidity and allow it to operate."

"We were forced to ground the company's main operations, flying passengers, due to the government's instructions and we are operating our wide-bodied passenger aircraft and cargo aircraft in the cargo saector. We have formed a streamlining plan which will allow the company to operate in the coming years and return to profitability - but these steps are not sufficient without Israeli government support."

With no agreement on government assistance and a 'going concern' warning, liquidation looms.

Published by Globes, Israel business news - www.globes-online.com - on May 14, 2020

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

El Al dreamliner / Photo: Yochai Mussi
El Al dreamliner / Photo: Yochai Mussi
Twitter Facebook Linkedin RSS Newsletters גלובס Israel Business Conference 2018