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El Al begins 2,000 layoffs

Hundreds of El Al Israel Airlines Ltd. (TASE: ELAL) employees received letters summoning them to a hearing prior to being dismissed. In the first stage, employees who have no tenure, which includes most of the cabin crew, are being dismissed.

El Al said, “As part of the streamlining program, El Al is announcing at a critical juncture on the way to receiving a loan from the state that the company has sent dismissal notices to hundreds of temporary employees only at this stage.” The company’s employees will remain on unpaid leave until at least March 31.

El Al will receive a loan from the Ministry of Finance after the airline reached a stalemate in its protracted talks with Israel Discount Bank (TASE: DSCT), Bank Leumi (TASE: LUMI) and financial institutions for raise $300 million debt with 82.5% guarantees from the state.

The Ministry of Finance has not approved the terms of the loan and the interest rate that the banks were demanding and anyway most of the risk was being taken on by the state, so that the new plan was formed with the state grating the loan and upfront payments for airline security services over the coming years.

El Al controlling shareholder Eli Rozenberg is being asked to inject a further $40 million into the airline as part of the new plan, which will increase his overall investment in the company to $200 million. His father Kenny Rozenberg immigrated to Israel last week and having received citizenship it is quite possible that he may take over managing matters.

The layoffs are part of the streamlining agreement, which El Al signed with the company’s various workers committees.

El Al currently has 6,300 employees and the rescue package from the state is contingent on the company first cutting the workforce to 4,300.

Source: Globes