MIAMI – El Al Israel Airlines (LY) has today extended its suspension of flights to the end of August and said it reached cost-cutting agreements with the country’s main labor union, facilitating a government bailout.
On July 7, LY decided to accept a rescue package from the Israeli government after its first rejection of the measure.
As part of the aid package, the company will receive loans amounting to US$50m, most of which is guaranteed by the state.
Now, the airline’s board has agreed to a government offer of US$250m in bank loans on condition that El Al issues US$150m in shares. The state said it would buy the shares, giving it majority ownership, if no one else did.
El Al Layoffs Expected
The Israeli flag carrier, which sent nearly all of its 6,500 employees on unpaid leave since the coronavirus outbreak, has said it will go bankrupt without state assistance.
The government has offered to guarantee bank loans and even buy a majority stake, but it is demanding an overhaul, including some $400 million in cutbacks. The airline’s workforce is expected to be reduced by about 2,000 employees.
El Al said it signed an agreement with the umbrella Histadrut labor federation regarding the airline’s 650 Pilots, who have been the last holdouts. Flight attendants, mechanics, and administrative staff have already signed on.
Histadrut said the pilot agreement alone would bring $105 million in spending cuts. The pilot’s association, however, did not support the deal, saying it was a maneuver to secure government assistance and that a final arrangement needs to be reached.
Statement from El Al
Chief Executive Gonen Usishkin (53) said, “the company has now met the “basic conditions” to receive the bailout. “The plan includes parting ways with many people, salary reductions and giving up benefits,” Usishkin said in a letter to employees.”
The mandatory furlough was also extended to the end of August, and should commercial flights resume then, workers will be gradually brought back, he said.