El Al reaches bailout agreement with Finance Ministry

The announcement follows months of negotiations after El Al's plan to arrange a state-guaranteed loan from the banks was stymied by the Finance Ministry.

El Al plane equipped with Elbit's Directed IR Countermeasures (photo credit: ELBIT)
El Al plane equipped with Elbit's Directed IR Countermeasures
(photo credit: ELBIT)
El Al Israel Airlines and the Finance Ministry have finally agreed a financial package that will keep the state’s flag carrier in the air.
The announcement follows months of negotiations after El Al’s plan to secure a state-guaranteed loan from the banks was stymied by the Finance Ministry. The new arrangement will allow El Al to continue operating despite being pummeled by the grounding of the vast majority of flights due to the coronavirus pandemic.
The bailout deal has several components: First, El Al will receive a payment of $210 million advance for flight tickets for aviation security officers on its and its subsidiary, Sun D’or, for the next 20 years.
The airline has also committed to implementing its tough recovery plan, which includes laying off 2,000 workers, nearly a third of its workforce, in order to save some $400 million in the coming years.
Finally, El Al will be required to raise $105 million through a public offering, with controlling shareholder, Eli Rozenberg, buying at least $43 million of the shares. The offering must be completed by July, the company said.
In addition, El Al also agreed not to distribute dividends or repurchase shares, until the end of 2025, and to reduce by 15% the salaries of the company’s management and the chairman of the board.
The agreement is subject to government approval and the El Al’s board, the airline said. If any of the conditions are violated, the amount received must be repaid to the state.
Many El Al customers, as well as suppliers, have still not received refunds for flights canceled over the past year due to the pandemic and paying them back will be one of the airline’s first orders of business.
El Al is a vital enterprise employing thousands of workers and supporting tens of thousands of workers in related industries.
The agreement reflects the airline’s great importance to Israel’s economy, both as the national carrier and as an important growth engine, with an annual contribution about NIS 2 billion to GDP both directly and indirectly, the company said.
Following the announcement of the deal, El Al will continue to carry out its national and commercial activities as it prepares for a return to full activity as coronavirus restrictions are lifted.
Rozenberg, 26 acquired the controlling share of El Al in October when his father, US businessman Kenny Rozenberg, was barred from the sale because at the time he was not an Israeli citizen but Kenny Rozenberg made aliyah earlier this month and he now lives in Jerusalem.