Israel’s Finance Ministry announced a new bailout plan for the beleaguered El Al Airlines on Sunday, retracting its prior offer to guarantee a $400 million loan, instead offering state-backed loans and a share sale.

According to the plan’s outline, the finance ministry will guarantee a $250 million loan instead of its prior offer of the $400 million loan that El Al requested.

El Al would have to raise the remainder of the funds by issuing shares of $150 million, with the government committing to buying any shares that aren’t purchased, a realistic scenario in light of the uncertainty of the future of international travel amidst the coronavirus pandemic.

If none of the stock is sold, the government would buy all the shares, and would then own 61% of the company, despite the government’s long-standing policy of privatizing government-owned companies.

El Al notified the Tel Aviv stock exchange of the Finance Ministry’s offer, but the offer must be approved by El Al, the government and the Knesset Finance company before it can be voted on by El Al shareholders.

The Borowitz family, who acquired El Al 15 years ago through its company Knafaim Holdings, currently owns 38% of the company, 8% is owned by Pinchas (Pini) Ginsburg, and the remainder is traded on the Tel Aviv Stock Exchange.

The Borowitz family is not expected to purchases more shares, opening the possibility of Knafaim controlling as little as 19% of the company.

The finance ministry’s new bailout plan is contingent on several conditions, including drastic cost-cutting measures of $400 million a year – requiring a layoff of 2,000 of El Al’s staff of 6,500 – selling up to 10 of its jets, and halting non-profitable routes.

New collective labor agreements would have to be reached with unions, a particularly thorny difficulty for the company due to the agreements including major labor cutbacks.

El Al announced later on Sunday that it is extending its suspension of passenger flights until the end of June.

(YWN Israel Desk – Jerusalem)