State of Israel to Operate El Al Airlines, Board Approves Nationalization

By Hadassa Kalatizadeh

El Al Airlines’ board of directors has approved its nationalization and acquisition by the State that will continue to operate it, according to a report Monday on the Israel National News web site.

In recent months, the company suffered heavy losses after having to halt operations since the beginning of the coronavirus crisis and closing the skies in Israel that have not yet been opened for tourism.

INN reported that according to the summary, the company will receive a $250 million loan on State guarantee and another $150 million through stock issuance.

If the public does not buy the shares, the company will officially transfer to the State, about 15 years after it was privatized, as was reported by INN.

The Treasury Department explained that the State has no desire or interest to control the company and if that becomes the case, a State trustee will manage it.

Additionally, El Al has furloughed its 500 remaining employees, including 100 pilots.  The news came on Thursday amid a labor dispute which led the company to ground all its flights in and out of Israel.  “Since the pilots refuse to staff the flights — which include cargo flights and a limited number of passenger flights — we are forced to make personnel adjustments,” El Al said in a statement.

As per the Times of Israel, the last of the company’s employees were put on unpaid leave due to the Coronavirus, including maintenance workers, flight attendants and ground crews.  As reported by Times of Israel, on Wednesday, El Al grounded all flights after labor talks between the pilots committee and company management fell apart.   The company has already cut a great majority of its workforce, and has even made use of pension funds to stay afloat amid the global pandemic and its ensuing shutdown. Following heavy losses, the airline’s last hope to push off insolvency is a government bailout.

Earlier in the pandemic, El Al, which boasted a workforce of 6,303 people, had already placed 80 percent of its workers on unpaid leave.  Management salaries were cut by 20 percent.  Investments were halted, and the company has also signed agreements to sell and lease-back three Boeing 737-800s.   El Al owes about $350 million to passengers whose flights were canceled due to the pandemic.

Hundreds of food service workers at El Al subsidiary, Tamam, which makes Kosher airline meals for several airlines operating through Ben Gurion International Airport, have also been furloughed. There is growing concern in the country about a possibility of mass layoffs.

As per Ynet news, Wednesday’s flights were canceled after talks between pilots committee representative Nir Reuveni and airline CEO Gonen Usishkin broke down on Tuesday evening. The pilots refused to fly on Wednesday’s flights, prompting the airline’s management to transfer the pilots to other active positions in the company, resulting in many of them being furloughed.  The airline has said commercial flights will be suspension till the end of July, although it will continue to use its aircraft for cargo and sporadic passenger flights.

The company’s quarterly report for January-March was released late Tuesday revealing $140 million in losses in the first quarter of 2020.  Revenue this quarter fell to $320 million for the company. Last year, at the same period, the company had losses of $55 million, with revenue of $428 million.