EL AL Israel Airlines has accepted a bailout worth $400 million from the government that will likely give Israel a majority stake in its flag carrier.
EL AL Bailout Details
The bailout includes:
- $250 million government-backed loan – Israel will guarantee 75% of the loan in case of default
- $150 million stock offering in the Tel Aviv stock exchange
As part of the detail, 2,000 employees will likely lose their position. More than 80% of EL Al’s 6,000+ workforce is currently on unpaid leave. Last week, pilots walked off the job in protest over pay and benefit cuts, forcing EL AL to cancel even its nominally profitable cargo sectors. The following day, more pilots, flight attendants, and managers were furloughed.
Under the deal, if private buyers do not step up to buy the latest stock offerings, the government is obligated to purchase it. As the Times of Israel notes, that caveat could catapult the State of Israel back into majority ownership of the troubled carrier.
EL AL was privatized in 2004 but was struggling even before COVID-19 hit. It carries over $2 billion in net debt and owes at least $350 million to passengers whose flights were cancelled due to the pandemic.
With this news just breaking, labor unions have not responded yet to the specter of jobs cuts and permanent redundancies. Support from labor will be necessary for this deal to be approved and EL AL to resume flights, which it hopes to do later this month.
I never feared for the survival of EL AL because it is far too important an asset to Israel. But the austerity of the relief package will be difficult pill for many employees to swallow. EL AL will live to see another day, but emerge a smaller and leaner company.
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