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Industrials

UPDATE 1-Israeli airline El Al appeals to PM Netanyahu to save it

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TEL AVIV, May 13 (Reuters) - El Al Israel Airlines called on Israeli Prime Minister Benjamin Netanyahu to rescue it on Wednesday, rejecting what it said were impossible conditions for state-backed loans.

Israel’s government is demanding an overhaul of El Al, including layoffs, before agreeing to a lifeline.

The cash-strapped airline has been locked in negotiations with Finance Ministry officials over government backing for 80% of a $400 million loan to help El Al through the coronavirus crisis.

Foreign visitors are barred from entering the country and incoming Israelis must self-quarantine, which combined with a global fall in demand for travel has hit El Al hard, leaving it with only its cargo business and occasional rescue flights.

The airline suspended passenger flights until at least the end of May, while about 6,000 of its 6,500 workforce are on unpaid leave until June 30. Workers have been protesting against layoffs.

A senior El Al official told Reuters that to receive government backing for the loan from either Bank Leumi or Israel Discount Bank the airline has agreed to cut 2,000 jobs and reduce annual expenses by $350 million out of a total of $2 billion but that ministry officials continued to tighten their demands.

El Al CEO Gonen Usishkin said in a letter to Netanyahu that the government’s demands would send the airline into liquidation.

“We ask that you instruct the Finance Ministry to amend the plan and remove the impossible conditions,” Usishkin wrote, adding it “refuses to connect El Al to a ventilator, as most countries in the world have done”.

El Al has committed to refunding the value of unused tickets to customers totalling 1 billion shekels ($285 million), but if it goes bankrupt, customers would lose this money, Usishkin said.

He also said that in the event of bankruptcy Israel’s security would be harmed since the country would be reliant on others, while 30,000 direct and indirect households would lose their livelihoods, and the economy would lose 2.5 billion shekels a year.

The Prime Minister’s Office declined to comment.

Netanyahu plans to meet Finance Ministry officials later on Wednesday.

The Finance Ministry in a statement called on El Al to return to negotiations and said threats to the government were not a substitute for talks.

The government has argued the airline’s problems, including a bloated workforce, high salaries and a weak balance sheet, began well before the COVID-19 outbreak.

After delaying the release of fourth quarter results twice, El Al plans to report on Thursday. Israeli media said it could include a “going concern” warning. ($1 = 3.5145 shekels) (Reporting by Steven Scheer; Editing by Alexander Smith and Jane Merriman)

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