El Al is expected to run out of cash in about two months after losing $23 million in the second quarter of 2020 due to COVID-19 disrupting the flight market, and had appealed to the state for extra aid, TheMarker reported on Tuesday.
The airline requested that the state offer it further aid to enable it to ask the banks for more loans or to sell bonds to the tune of $400 million, instead of its original request for $250m. worth.
The airline was recently acquired by Eli Rozenberg, a 26-year-old yeshiva student with no previous experience in tourism or airlines. This despite allegations he is serving as a front for his father, Jewish-American businessman Kenny Rozenberg. El Al informed the Finance Ministry last week that it hoped that business would pick up and return to 75% of its pre-COVID-19 level in late 2021. Now it reports that the disruption in air travel will continue until 2024.
The airline was able to earn nearly $150m. by selling stock, but had to pay passengers roughly $70m. for canceled flights. The state, which owns 14% of El Al stock, requested that the airline present it with evidence of how it will improve its efficiency, before discussions on further aid continue.
El Al allegedly suffers from a very powerful pilots’ union, which previously objected to any cuts in pay or work conditions. The airline is seen as a strategic asset by the State of Israel. Transportation Minister Miri Regev even vowed that she would “save” the airline no matter what the cost might be.
On Monday, the Knesset Corona Committee was informed that Europe is entirely “red” – meaning that COVID-19 infection rates are on the rise in countries Israelis usually visit; these are also the countries El Al hoped to sell flight to.
Also on Monday, Greek authorities enforced a total lockdown on Thessaloniki after the northern city witnessed soaring COVID-19 infection rates. El Al and other airlines halted all flights, leaving thousands of Israelis stranded. These same Israelis had been informed that Greece is a green country, with low infection rates, and so booked their flights.
Israelis are expected to check with the Health Ministry before leaving the country to ensure the countries they mean to visit won’t turn red during their stay. But due to the unexpected nature of the novel coronavirus, air travel seems riskier now than ever before. The ministry might judge a country green, but that nation’s government might reach a different conclusion in the space of days or even hours.
El Al did open flights to supposedly green countries like Serbia, Greece and Bulgaria as soon as it could – but Israelis didn’t hurry to leave the country, so many flights took off with few passengers and ended up losing money.
The banking sector isn’t comfortable with lending El Al money to keep it afloat unless the state steps in, and the state isn’t eager to do so before the airline presents it with a clear path to show a profit.
Only time will tell if the young Rozenberg will be able to lead El Al out of this highly complex situation.