The Finance Ministry agreed to El Al’s request for a state-backed $400 million loan following a meeting of senior finance, transportation, and tourism ministry officials with El Al officials on Sunday regarding a recovery plan for the beleaguered national airline.

The loan is conditioned on a recovery plan that requires El Al to implement a host of reforms, including requiring the airline’s owners to inject at least NIS 100 million ($28.5 million) into the company and restructuring its operations to implement annual cost-cutting measures by at least $50 million, a reduction that would require an estimated 2,000 employees to be laid off – about one-third of El Al’s workforce.

The layoffs will require approval by El Al’s workers’ union, which held a protest outside the Finance Ministry as the meeting took place on Sunday. The union also scheduled a protest on Tuesday outside the Prime Minister’s Residence in Jerusalem to demand he live up to his promise that he “will not allow El Al to collapse.”

El Al was struggling even before the coronavirus pandemic due to competition at Ben-Gurion from low-cost airlines on its routes to Europe. Furthermore, they had just invested in a fleet of Dreamliners which they are obligated to continue paying for despite the coronavirus pandemic. The airline was also laying the ground to expand into Japan and Australia before the coronavirus pandemic began – those plans have now been shelved.

דיון חירום על עתידה של אל על.
במשתתפים: השר כחלון וסגנו, השר לוין, רונן פרץ (מנכ"ל משרד ראה"מ), שי באבד (מנכ"ל האוצר) ושאול מרידור (אגף תקציבים). pic.twitter.com/0sb4gaM4Ws

— אברהם גרינצייג (@avigrin10) May 10, 2020

Last week, a court ruled that El Al can pull NIS 105 million ($30 million) from its employee pension and compensation fund in an emergency measure to avoid complete financial collapse. El Al had originally requested to use NIS 354 million ($100 million) of its NIS 413 million ($117 million) fund but the amount was reduced in a compromise between El Al, the Histadrut (labor federation) and the Finance Ministry.

Also last week, the Finance Ministry offered Israir and Arkia airlines NIS 100 million ($28.5 million) in state-backed loans to bail the low-coast airlines out from financial collapse, a move viewed as crucial by the state to ensure there are aircrafts available in the case of an El Al collapse.

Air travel in Israel has dwindled to several flights a week, including a daily United Airlines flight to Newark, New Jersey.

El Al has suspended all passenger flights until at least the end of May and has put 6,000 of its employees on unpaid leave until June 30.

(YWN Israel Desk – Jerusalem)