It was only a matter of time before El Al joined the list of airlines slammed with class action suits by disappointed customers – a request to launch such a suit was filed this week in an Israeli court. El Al, like the other airlines, violates the Aviation Law by not returning money to passengers whose flights have been canceled.
And as EL AL continues to cancel its scheduled flight, its debt to those customers is increasing. So far, it is estimated at NIS 1.5 billion ($437 million). The airline has already announced that it would not start flying again before July 31, a date that will most likely be extended, since so many countries do not allow Israeli passengers to enter, and the fact that foreign travelers must endure a quarantine when entering Israel.
The lawsuit claims that the way El Al treats its customers reflects a hostile attitude whereby the company ignores their complaints and expects them to understand its plight.
The amount cited by the request for recognition of the class action lawsuit against El Al is the same as the amount the company has asked the state to help it raise – $400 million. If El Al returns all the money it owes to its disappointed passengers, it will have nothing left of the aid it has been fighting for to pull itself by its bootstraps (actually, by the taxpayers’ bootstraps).
No matter how much El Al owes the ticket buyers, it only had $132 million in cash at the end of the first quarter of 2020, and anyone of us who mastered 4th grade math knows you can’t pay out 400 million apples if all you have are far fewer apples.
El Al’s life depends on a bank loan of $250 million, 75% of which is guaranteed by the state. The rest it hopes to get from selling shares – and the state has promised to buy up whatever the public refused to touch. But the loan is conditioned on completing El Al’s efficiency plan, which involves laying off 2,000 of its 6,300 employees, cutting $400 million a year in expenses and signing employment agreements with its four unions.
So far, El Al’s pilots’ union is refusing to approve the dismissal of 150 out of 650 pilots and a 35% cut in salaries for the lucky ones who keep their jobs.
On Monday, the Knesset approved in second and third readings the Aviation Services Bill, intended to help Israeli airlines to deal with the cash flow difficulty created by the coronavirus crisis. According to the new law, the local airlines must return the money to ticket purchasers for flights canceled within 90 days from the date stated on the ticket, or by August 14 – whichever is later.
The airlines may offer their passenger an alternative flight ticket or a credit voucher instead of the monetary consideration. El Al has hundreds of thousands of members in its frequent flyer club, to whom it can offer an alternative, upgraded ticket in appreciation for their willingness to wait. They could also receive additional incentives in the form of extra miles.
Israir has been offering passengers a 25% addition to the value of their purchased tickets if they leave their money with the company against a future flight. But Israir’s CEO Uri Sirkis told Globes that only 13% of the passengers chose this option over a refund, and the reason in his opinion is that he has no product to offer them without being able to actually fly.