Israeli Airlines Ask for Government Bailout for COVID Losses2 min read
On Thursday, Israel’s flagship airline, along with two other local carriers, demanded regulatory and financial support from the government. They warned that without this support, they would collapse because of the impact of the COVID-19 pandemic on the travel industry. The CEOs of Arkia, El Al and Israir signed a letter that was sent to the Prime Minister of Israel, Naftali Bennett, the Finance Minister Avigdor Liberman and a number of other officials and lawmakers. The letter blamed policies of the government for cratering their businesses and also called for a rollback of travel restrictions.
They claimed that the travel industry had missed out on the bailouts that were given to other industries. Avigal Soreq, the CEO of El Al, Uri Sirkis, the CEO of Israir and Gadi Tepper, the CEO of Arkia, said it was highly doubtful that aviation companies in Israel would be able to pull through the crisis. The companies noted in the letter that the aviation industry has been facing a crisis for a year and half due to the outbreak of the coronavirus. They said that travel demands had gone down and the airlines had faced serious uncertainty. The lull in travel had been influenced directly by the decisions of the government and orders of the health ministry.
The CEOs argued that entry bans on residents or non-citizens, quarantine rules and government calls for not taking unnecessary flight had all affected their business. Even before the COVID-19 pandemic struck, El Al was facing financial problems and the pandemic just ended up wiping out international travel. Last year, Eli Rozenberg, a 27-year-old yeshiva student, bought the airline, thanks to the financial backing of Kenny Rozenberg, his non-Israeli father. The senior Rozenberg had become an Israeli citizen earlier this year, which is a requirement for owning a controlling stake in the national carrier of the country.
That’s when he took control of the airline. Last year, the government and El Al had agreed on a bailout package, which included the airline letting go of one-third of its employees in return of $210 million from the government in security personnel’s advance tickets. The deal also included terms of the controlling shareholder injecting $43 million into the company and the issue of new shares worth $150 million. However, a letter sent to the treasury director indicated that the $210 million hadn’t been enough to pull the company out. Soreq asked for immediate compensation of $100 million for dealing with the COVID-19 impact.
This figure is twice the amount of $50 million that had been offered to El Al as a balloon loan by the Finance Ministry. The recovery plan for the airline will see it sell off some of its planes, which would mean reducing its fleet to 29 from 45, and also laying off some of its workforce. A loss of $86 million was reported by El Al in the year’s first quarter, as opposed to the $140 million loss it had reported in the same quarter a year ago.