Navigating the crisis: How does El Al's anticipated bailout stack up?

Rescue package negotiations between Israel's flagship carrier El Al and the Finance Ministry are still ongoing after more than six weeks of talks and repeated warnings of imminent collapse.

An Israeli flag is seen on the first of Israel's El Al Airlines order of 16 Boeing 787-9 Dreamliner jets, as it lands at Ben Gurion International Airport, near Tel Aviv (photo credit: REUTERS/AMIR COHEN)
An Israeli flag is seen on the first of Israel's El Al Airlines order of 16 Boeing 787-9 Dreamliner jets, as it lands at Ben Gurion International Airport, near Tel Aviv
(photo credit: REUTERS/AMIR COHEN)
Earlier this week, US passenger airline owners and employees breathed a joint sigh of relief after agreeing in principle to a $25 billion bailout package that will enable them to keep paying thousands of workers.
This, in addition to some $50b. in grants and loans offered under the Trump Administration's $2tn. stimulus plan released in late March.
Global airline passenger revenues are estimated to drop by $314b. this year as the coronavirus outbreak causes travel to ground to a halt, the International Air Transport Association (IATA) said Tuesday in its latest forecast, with Israeli airlines also bearing the brunt of the economic fallout.
Rescue package negotiations between Israel's flagship carrier El Al and the Finance Ministry are still ongoing after more than six weeks of talks and repeated warnings of imminent collapse should they not reach an agreement. The latest meeting between representatives was scheduled for Thursday evening.
Currently on the table is a $345m. government-secured loan, due to be paid back over six years once El Al returns to a steady state. The most serious string attached to the loan is a purported agreement to make some 1,600 of the airline's 6,500-strong staff redundant.
The terms of the loan will also apply to assistance sought by fellow airlines Arkia and Israir, and will include mechanisms for government takeover or bankruptcy in the case of default.
While no public official has doubted the importance of maintaining Israel's aviation independence, how does the likely bailout to rescue Israel's iconic carrier compare to packages being discussed and rolled out across the Western world?
Unlike the El Al deal, which is dependent on the redundancy of workers, the package unveiled in the US this week places the continued employment of workers at its heart, with much assistance in the form of direct grants. In return, the Treasury Department will receive rights to acquire airline stocks at a set price over the coming years.
In Paris, Air France-KLM is reportedly in talks with Bercy to receive banks loans worth a total of $6.5b., guaranteed by the French and Dutch governments. Whereas the Israeli government holds a "golden share" in El Al, ensuring that the carrier continues flights to vital destinations, the French and Dutch governments each hold approximately 14% stakes in Air France-KLM.
The Italian government took a different approach. After years of financial trouble and bankruptcy at Alitalia, authorities have announced plans to renationalize the struggling airline. Portuguese Prime Minister Antonio Costa has not ruled out the idea of nationalizing partially state-owned TAP and other airlines.
British authorities, however, have been reluctant to become involved in the sector. In a letter from Chancellor of the Exchequer Rishi Sunak to the UK aviation industry, published by Sky News, the government made it clear that negotiations with individual companies would only be a "last resort, having exhausted other options." These include raising capital from investors, utilizing assets and facilities, and engaging with lenders and markets.
German carrier Lufthansa has announced that it will seek state support for the airline and its subsidiaries in Germany, Austria, Belgium and Switzerland. Reuters reported that Germany was in talks to assist the airline with "billions of euros in state aid" and could also acquire a stake in the company. Government support schemes for Belgian and Swedish airlines received a green light from European Union regulators earlier this week.
Should a deal be struck in the coming days to rescue El Al, the airline and its employees are likely to pay a heavy and painful price for its survival.
As the IATI warns of airlines running out of cash soon and a lengthy process to restore consumer confidence, generous government interventions will be required to assist airlines worldwide. Otherwise, the aviation industry is likely to look very different once the coronavirus crisis comes to an end.