The Travel Adviser: Let the games conclude

If El Al chooses to be the official carrier for the 20th Maccabiah Games major changes must take place quickly.

By
July 27, 2013 22:55
El Al airplanes

El Al airplanes. (photo credit: Ronen Zvulun / Reuters)

Its origins go back to 1932. Planning took over 14 years and to generate interest, supporters traveled by motorcycle to collect donations. Delegations went from motorcycle to ship and even by ferry to London. Back then over 400 people took part. Today she is proud to have over 9,000 participants from 75 countries.

We’re talking about the 19th Maccabiah Games, the quintessential “Jewish Olympics,” which are held in Israel every four years and boast a rich history.

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El Al, the official carrier for the Maccabiah Games, also has a rich history. She took several years of planning until her inaugural flight to Geneva in September 1948. Today she has almost 6,000 employees and with her all-Boeing fleet serves some 45 destinations.

CEO Elyezer Shkedy has stated publicly that it is a great privilege and honor for El Al to have flown the majority of the athletes participating in this year’s Games. He reiterates that El Al’s security, in and of itself, is not the reason passengers choose to fly El Al. While no longer state owned, El Al sees itself as the civilian wings of the State of Israel.

Sadly while his enthusiastic spirit resonates among so many citizens and tourists around the world, the house of cards he sits upon is very close to collapse. It is quite clear among many government and business leaders that if El Al chooses to be the official carrier for the 20th Maccabiah Games major changes must take place quickly.

Management as well as sales and marketing personnel have moved from Ben-Gurion Airport to the nearby community of Or Yehuda. But the bulk of El Al’s workers in such departments as logistics and their reservations department remain ensconced in offices at the airport. Heavily unionized with little desire to change their work methods, thousands of employees have tenure in their positions and use cronyism to bring friends and family into their fiefdom.

Unable to join any of the three worldwide airline alliances, with a shrinking network of cities that she flies into and with the credible threat of the Open Skies treaty just signed with the European Union, El Al’s ability to compete in the world’s arena is severely challenged. With its stock price trades in a narrow range on the Tel Aviv Stock exchange and quarterly losses continuing to mount, it is capital the company needs and capital it is desperately trying to raise.

Senior management often acts as if El Al is the sole airline in the world. One glaring example is that no Israeli citizen can purchase an El Al ticket from any travel agent in the world and pay with his or her Israeli credit card. Yes, an American can use his Bank of America-issued credit card, a South African can pay on his Standard Bank credit card, while a Brit can buy a ticket on his Barclaycard. But if an Israeli wants to purchase an El Al ticket from his travel agent on any Israeli bank-issued card, he is rebuffed.

This has been pointed out constantly to the El Al comptroller who simply states, “We don’t want to absorb the service fee.”

When it is pointed out that on their site, they do accept Israeli credit cards, a smug smile appears and his curt retort is “we’re not like other airlines.”

Let the games continue. Along comes Ishay Davidi, Israeli educated and trained, who through his investment company breathlessly announced he would pump up to $60 million into El Al and attain majority control. His investment would be made through his fund FIMI, which stands for First Israel Mezzanine Investors Fund, which is aptly named as both management and workers at El Al have declared their personal and collective needs come first.

FIMI’s criteria to invest were quite simple: management must sign a collective agreement with the workers. With a deadline set for the end of August, negotiations have moved at a glacier pace – so slow in fact that FIMI felt obligated to inform the Tel Aviv Stock exchange recently the following: “In view of the slow progress in the talks of a new labor contract between the company and its employees, and because signing this agreement is one of the conditions for closing the investment agreement, FIMI believes that there is little chance that the investment will be made on the date set in the investment agreement. In order to improve the chances of closing the deal, FIMI is extending the agreement.”

In an addendum, FIMI added that if El Al found another buyer willing to invest in the airline, FIMI would have no objection to backing out of their proposal.

The bottom line is simple – El Al’s management won’t accept the employee’s terms, while the employees won’t accept management’s terms. As far as El Al’s employees are concerned, FIMI’s entry is welcome, but not at any price. Many topics will not even be discussed by the employees, the most critical of which are pay cuts and reductions in benefits. They are willing to be flexible on other points, such as early retirement provided they receive double the compensation set down in law.

The strongest workers committee’s group has 500 members consisting of pilots and air crews. Management, under CEO Shkedy, the former head of the Israeli Air Force has been tense in recent years. Some progress has been reached with the pilots, who will agree to a pay cut for a limited period. They have also acquiesced in agreeing to negotiate a new labor contract, but only at a later stage.

The head of the El AL’s workers, Asher Edry, has stated quite forcefully to management that no concessions in the new collective agreement will occur without layoffs among the airline’s executives. They are demanding a reduction in the number of vice presidents and division heads and a slashing of their salaries. In fact, they are clamoring that executive salaries revert to what it was before the airline was privatized – $800,000 a year. Even if this were to happen, the executives would still have reasons to worry, because if FIMI invests in the airline, it will likely replace them with their own, more competent people.

Thus, some El Al executives have a clear interest in shooting down the FIMI deal, in contrast to the present majority owners, the Borovich family, who want to exit this quagmire as quickly as possible. They are waiting with bated breath for FIMI after failing to find an investor for years.

CEO Davidi of FIMI was wise to make its investment in El Al conditional on the signing of a new collective agreement. With aggregate losses of over $68 million the last two years, he wants to take on El Al clipped and ready to soar. Now that the government is participating in almost all of the airline’s security expenses, El Al’s costs have been dramatically cut. As things stand now, FIMI’s participation in El Al is only theoretical. With management and workers not budging, the chances of signing a collective agreement to FIMI’s satisfaction, even after the extension, remains slim.

The State of Israel still owns 13% of the airline; sadly finance ministers, past and present, have done little to alter El Al’s woes. As the opening ceremonies of the Maccabiah Games showed, marching in unison is the key to success.

Like so many other poorly operated airlines have done, the humane path is to declare bankruptcy, fire everyone, and begin immediately in rebuilding EL AL with enthusiastic management and workers who understand that teamwork is the only recipe for success.

Mark Feldman is the CEO of Ziontours Jerusalem For questions and comments, email him at [email protected]


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