El Al CEO: No renewal of flights without rescue agreement

"We will not be able to renew operations without reaching an agreement for the arrival of the loan," Gonen Usishkin wrote in a letter distributed to employees.

By EYTAN HALON
El Al Israel Airlines planes are seen on the tarmac at Ben Gurion International airport in Lod, near Tel Aviv, Israel March 10, 2020. (photo credit: REUTERS/RONEN ZEVULUN)
El Al Israel Airlines planes are seen on the tarmac at Ben Gurion International airport in Lod, near Tel Aviv, Israel March 10, 2020.
(photo credit: REUTERS/RONEN ZEVULUN)
Israeli flag carrier El Al will be unable to renew flying operations unless it agrees to a critical $250 million bailout loan with the government, the airline's chief executive informed employees on Monday.
“Regardless of the state of the aviation industry, government decisions regarding opening the skies and the start of flights to and from Ben-Gurion Airport by other airlines, we will not be able to renew operations without reaching an agreement for the arrival of the loan,” Gonen Usishkin wrote in a letter distributed to employees after the Finance Ministry proposed a revised plan to rescue the struggling carrier.
The government-secured loan is a “basic condition and prerequisite” for the resumption of flights in order to allow the payment of debts to both customers and suppliers, said Usishkin, announcing that the unpaid leave of 5,800 members of staff would now be extended by a further month - until July 31.
Late on Sunday, the airline said it would extend its halt on all scheduled flights to and from Israel until June 30, with the exception of cargo flights and one-off services.
El Al executives are expected to discuss the Finance Ministry’s revised plan to bail out the airline later this week, which will also require the agreement of an Israeli bank, the El Al workers union, government and the Knesset’s Finance Committee.
According to the revised proposal received by El Al management on Sunday, the government is willing to offer a $250m. loan to the flag carrier.
In addition, El Al will issue shares worth $150m., backed by a government guarantee to purchase shares that are left unsold, an agreement that could ultimately turn the state into the majority shareholder of the company.
The plan, which is conditional upon severe cost-cutting measures and layoffs expected to affect one-third of the airline’s 6,500-strong workforce, represents a significant shift in strategy following months of unsuccessful negotiations between El Al and the Finance Ministry for a $400m. government-backed loan to bail out the battered company.
Commenting on the new proposal, former El Al CEO Amos Shapira expressed his view that airline management may have no choice but to accept the new offer, even if it means that the “next crisis is only a matter of time.”
“If you take this company and make it even smaller, you reduce its ability to compete even more,” Shapira told Army Radio, emphasizing that El Al’s precrisis woes were primarily caused by the difficulty in competing with international aviation giants including Lufthansa.
“These are not efficiency measures, this is clipping El Al’s wings,” Shapira said.
Demonstrating the scope of the blow suffered by Israel’s aviation industry amid the coronavirus pandemic, Ben-Gurion Airport published data on Monday showing a 99% drop in international passenger footfall last month when compared to May 2019.
A total of 18,197 international passengers passed through Israel’s leading transportation hub last month, compared to approximately 1.93 million during May 2019.
The destination with the highest volume of activity was the United States, with more than 36% of all passengers (6,563 in total) either arriving from or traveling to the country from Ben-Gurion Airport. The vast majority of passengers (6,086) traveled to or from Newark Liberty International Airport onboard flights operated by United Airlines.
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Plunging footfall comes amid a ban on all foreign nationals entering Israel since March 18, even if they can prove their ability to remain in home isolation for 14 days upon arrival. The entry ban is currently valid until June 15.
Domestic air travel has also recorded a dramatic decline, with only 8,979 passengers passing through Ben-Gurion Airport, compared to almost 40,000 in May 2019.
The 77.25% drop in footfall is even more substantial given that Ben-Gurion only replaced Sde Dov Airport as central Israel’s sole domestic aviation hub in July 2019.
In more optimistic news, cargo transportation last month registered a slight increase (1.52%) compared to May 2019. A total of 28,751 tons arrived and departed Ben-Gurion Airport, including 1,267 tons transported by passenger aircraft. 


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