El Al Israel Airlines, the Iraeli national carrier, said it reached an agreement with the country’s government, under which the state would guarantee $250 million, in exchange for company shares. The deal is yet to be approved and finalized.
Isreal government would back a $250 million bank loan to El Al Airlines and would purchase company shares worth $150 million, the airline announced in a statement on July 7, 2020. In this case, the state would acquire 61% shareholding of the air carrier.
However, the announcement is preliminary, as a number of actions and conditions remain to be met for the full implementation of the agreement. The release of new stocks to be purchased by the state could be completed by October 2020, based on the estimates of the local media.
Since December 2004, the largest El Al shareholder is Knafaim Holdings, Israel-based tourism and air aviation services company. As of July 2020, it controls over 38% of the airline’s shares.
Once the situation at the troubled carrier is stabilized, the government would look for a private investor, the Jerusalem Post reported.
While the carrier had been already familiar with financial losses prior to the coronavirus outbreak, the crisis deepened its liquidity problems even further. El Al lost $140 million in the first quarter of 2020, the airline revealed on June 30, 2020. The financial deficiency grew by 152% when compared to the previous year, when it recorded $55 million net loss (after taxes).
The company is also seemingly experiencing conflicts with its employees. The airline had planned to operate a small amount of cargo and passenger flights in July 2020. However, the services were cancelled for another month, until July 31, after the airline’s pilots refused to operate the flights, El Al explained in a statement released on July 3, 2020. Consequently, the airline said it had sent 400 employees, including pilots, on furlough. Prior to the conflict, approximately 90% of staff were already sent on unpaid leave in March 2020, local media reports indicate.