17 years almost to the day following the 2003 privatization of Israel’s national carrier El Al, El Al’s board of directors decided on Monday afternoon to adopt the Finance Ministry’s rescue plan, according to which the company will receive a $250 million loan with a state-provided 75% loan guarantee, along with the issuance of $150 million shares to the general public. The state will pledge to buy the shares that the public will not buy, which would facilitate the de facto nationalization of the company.
The deal is conditioned on El Al signing collective bargaining agreements with its employees that reflect efficiency measures required by the Finance Ministry, as well as the approval of the government and the Knesset Finance Committee.
Calcalist pointed out Tuesday that the move was made necessary because El Al’s controlling owner, Knafaim Holdings, which is controlled by the Borowitz family, does not have the will or the ability, or a combination of the two, to inject new capital into El Al. But in order to emerge out of its current slow slide into an open grave while all around the airline industry is fighting for its life, El Al cannot be schlepping a heavy debt on its back. And so the Israeli government is giving it a life saver: $150 million through shares to a company worth about $70 million, plus $250 million in a loan, now start swimming.
It should be noted that if the good reader were looking for a good investment for its Bar Mitzvah bonds that just matured, El Al is not the place for you. The company is worth about 14% of its value three and a half years ago, and is mired in labor disputes, which it solves and reneges on periodically. But Israel must have a national carrier, if only because no one else would fly out to rescue those Israelis who get stuck on a mountaintop in Peru or in a swamp in Bangladesh.
On July 1, El Al Israel Airlines canceled all its flights and suspended operations indefinitely, having reported massive losses over the first half of 2020 and with its pilots refusing to fly over a labor crisis. CEO Gonen Usiskhin ordered all of El Al’s aircraft to return to Israel.
Brother, can you spare $400 million?