Israel’s struggling carrier El Al could be flying back into state hands, as the company’s board accepted a government bailout that would likely give the state some 61 percent of the firm.
Under the deal, the airline will get a USD$250 million government-backed loan, with guarantees for 75% of the loan, in case the firm defaults.
It also includes a stock offering on the Tel Aviv Stock Exchange to raise $150 million to help prop up the equity of the firm, which has more than $2 billion of net debt. The deal stipulates efficiency steps that may lead to the firing of 2,000 workers.
The offering will come with a caveat that the state must buy any unsold shares, meaning that the state could once again end up as the majority stakeholder in the airline.
The company has entered deep financial trouble due to the pandemic, and last month shut down all air operations amid an ongoing labor dispute.
Tensions at the airline have been high after it slashed the vast majority of its workforce and dipped into pension funds to stay afloat, during the coronavirus crisis.
It put 80% of its 6,303 workers on unpaid leave, cut management salaries by 20%, halted investments, and signed accords for the sale and lease-back of three Boeing 737-800s.
The firm also owes some $350 million to passengers whose flights were canceled because of the pandemic.
A quarterly report for January-March issued last week showed $140 million in losses for the company in the first quarter of 2020, versus $55 million in losses for the same period last year. Revenue was down to $320 million for the quarter, a drop from $428 million last year.
The airline has prolonged the suspension of scheduled commercial flights until the end of July, but said it would continue to use its aircraft for cargo and occasional passenger flights.