El Al to lay off 1,000 workers due to coronavirus impact

The cost-cutting measure has been taken to "ensure the future" of the company.

The first of Israel's El Al Airlines order of 16 Boeing 787 Dreamliner jets, lands at Ben Gurion International Airport, near Tel Aviv, Israel August 23, 2017 (photo credit: REUTERS/AMIR COHEN)
The first of Israel's El Al Airlines order of 16 Boeing 787 Dreamliner jets, lands at Ben Gurion International Airport, near Tel Aviv, Israel August 23, 2017
(photo credit: REUTERS/AMIR COHEN)
El Al intends to lay off 1,000 permanent and temporary staff in the coming days, the airline said on Wednesday, as it rolled out a series of cost-cutting measures implemented to “ensure the future” of the company.
The figure represents almost one-sixth of the airline’s entire workforce and comes amid a severe decline in revenues as a result of the novel coronavirus outbreak. In addition, company executives and directors will be subject to a 20% wage cut, taking effect retroactively since March 1.
“I am determined to do everything to ensure the future of the company and to act with courage, openness and fairness,” said El Al CEO Gonen Usishkin following an urgent meeting with worker union representatives. “This is a difficult day for us, and the steps that we have decided upon are taken with a feeling of pain combined with responsibility and personal example.... The move is part of a series of steps being taken to enable the company to overcome the crisis and emerge from it stronger.”
Announcing that it would “eliminate all nonessential expenses at this time,” El Al said it would immediately halt the training and recruitment of all new employees until further notice.
El Al said it expects revenues to drop by $50 million to $70m. between January and April due to the outbreak, resulting from a “significant drop” in demand and wide-ranging travel restrictions imposed by the Health Ministry.
On Wednesday, the ministry said citizens returning from Germany, Spain, Austria and Switzerland will be required to enter two weeks of isolation. Similar instructions have already been issued for travelers visiting mainland China, Hong Kong, Thailand, Singapore, Macau, South Korea, Japan and Italy. Last week, the ministry called on citizens to reconsider all plans to travel abroad.
The airline has canceled all flights to China, Hong Kong, Thailand and Italy, and postponed the long-awaited launch of a nonstop route to Tokyo scheduled for March 11. Numerous flights to European destinations have been canceled this week as the company makes “commercial adjustments” to accommodate falling demand.
In a letter sent to employees on Wednesday, Usishkin said El Al has faced crises in the past, but that “the challenge presented to us this time is one of the most complex and difficult.”
He also highlighted measures implemented by Israeli authorities to contain the coronavirus outbreak that he said were unique in severity. New restrictions announced on Wednesday are likely to generate further financial challenges for the company.
Despite statements from public officials, including Prime Minister Benjamin Netanyahu and Histadrut labor federation chairman Arnon Bar-David, stating their intentions to offer assistance to the company, Usishkin said “nothing has been agreed at this time.”
The El Al workers union reacted angrily to Usishkin’s letter, saying that they were “amazed” to receive it while still in the midst of negotiations with representatives from the Histadrut and the government.
“It is important for us to make it clear to employees that workers representatives and the Histadrut have not agreed to any dismissal of employees, and we urge the management of the company to not make unilateral decisions,” the workers union said in a statement.
“We urge employees not to pay attention to the letter from the CEO and wait for updates and instructions from worker representatives. We promise: El Al is home for all of us, and we will do everything we can to save it.”
Despite the impact of the coronavirus outbreak on El Al and Israeli companies from a variety of industries, the Bank of Israel’s Monetary Committee concluded at its weekly discussion on Wednesday that “there is no evidence of a significant macroeconomic impact on the Israeli economy.”
Should the virus be halted within months, the committee said, the global economy is “expected to recover relatively quickly.” If the crisis persists and preventive measures in Israel become more serious and persistent, however, the committee said that “there is expected to be a significant economic impact.”