Israel’s Ministry of Finance has told El Al Israel Airlines (LY, Tel Aviv Ben Gurion) that it can provide a further USD50 million in aid to the struggling flag carrier, on condition that the airline sell some of its aircraft and a “significant” stake in its Matmid Frequent Flyer Club. Controlling shareholder Kenny Rosenberg must also inject USD43 million of his own cash into the company as an owner’s loan.
The sum, offered in a letter from Ram Belnikov, the ministry’s director general, is just one third of the USD150 million El Al had been hoping to receive in the wake of extended government restrictions on international travel.
The company said in a Tel Aviv Stock Exchange filing on September 9 that it had received the letter - which it attached - on September 6 and that it “is examining the letter and is continuing its contacts with the Ministry of Finance.”
The three-year loan would come in the form of bonds convertible into shares, without guarantees and without interest, and the shares would be distributed to the state at a discount of no more than 10% to the share price.
The letter demanded, without elaboration, “an undertaking regarding the date of sale of aircraft, the number of aircraft to be sold, and of what type” as well as a “commitment to sell a significant portion of the frequent flyer club, related to the net amount the company will receive from the club, the date on which the transaction will take place, and the manner in which the money will be raised.”
It also required “a commitment to reduce repayments in respect of the company’s financial debt that will facilitate the company’s cash flow in the next 12 months.”
The letter added that “a threshold condition for providing any state assistance to the company will be that the shareholders meet their obligation to inject a total of USD43 million into the company.” The commitment of USD43 million had been a condition in March when the government agreed to buy tickets in advance worth USD210 million.
Israel’s other passenger airlines have also asked for further state assistance due to the countryls ongoing travel restrictions, with Arkia Israeli Airlines (IZ, Tel Aviv Ben Gurion) requesting USD35 million and Israir (6H, Tel Aviv Ben Gurion) USD20 million. But the Ministry of Finance offered these two airlines only USD7 million each.
