Israel’s government has agreed to buy tickets in advance worth USD210 million from ailing flag carrier El Al Israel Airlines (LY, Tel Aviv Ben Gurion) and its low-cost unit Sun d'Or International Airlines (Tel Aviv Ben Gurion) as part of a package of aid measures overseen by the Ministry of Finance, the airline revealed in a stock exchange filing on March 18.
The state of Israel will pay the company “for a supply of flight tickets for personnel in the aviation security system,” covering the next 20 years, a sum that will remain unchanged even if security requirements are altered.
The government will transfer the funds in a set of instalments: ILS450 million shekels (USD136.5 million) within two business days; ILS118 million (USD35.8 million) within two days of the entry into force of an agreement with employees on severance pay and pensions for dismissed workers; and the rest within two days of an auditor’s approval that the company has paid at least USD20 million from non-trustee funds to employees for termination of employment.
The government plans to offer similar arrangements to other Israeli airlines carrying aviation security personnel, the finance ministry said. Israel’s only two other scheduled airlines are Arkia Israeli Airlines (IZ, Tel Aviv Ben Gurion) and Israir (6H, Tel Aviv Ben Gurion).
The ministry added that the ticket deal with El Al replaced the government’s earlier offer to back 82.5% of a USD300 million loan to the carrier. This guarantee had been contingent on its new owner, Eli Rosenberg, injecting more cash into the airline and cutting costs.
The efforts to obtain a loan fell apart when the ministry rejected the rates that Bank Leumi and Israel Discount Bank wanted to charge El Al, the Hebrew-language daily Globes reported.
However, this new ticket-based agreement - which the Ministry will soon submit to Prime Minister Benjamin Netanyahu’s cabinet for approval - depends on El Al issuing capital of at least USD105 million by July 31, the airline acknowledged in its filing. In that public offering, Rosenberg must buy at least USD43 million of the shares.
The company has already performed two public offerings in the last six months, with Rosenberg investing USD110 million in the first and USD50 million in the second.
El Al also again committed to implementing a streamlining plan that will cut costs by USD400 million by 2025. This includes laying off 2,000 employees, almost a third of its workforce.
Arkia Israeli Airlines is preparing to add other destinations and frequencies in related news as Israel continues to ease its Covid-related lockdown restrictions. It announced routes to Dubai International, Mahé, Tbilisi, Batumi, Belgrade Nikola Tesla, Kyiv Boryspil, Paris CDG, and Frankfurt International. According to the ch-aviation capacities module, the latter five destinations are already in operation, each 1x weekly except for 2x weekly to Kyiv. Citing what it said was high demand, with a “flood of calls” at its reservations centre, it promised daily frequencies to some destinations.
