El Al Israel Airlines Ltd. (TASE: ELAL) has rejected the Ministry of Finance’s offer of a $50 million balloon loan and is demanding compensation as part of a streamlining plan.
In a letter sent to Ministry of Finance director general Ram Belnikov, El Al CEO Avigal Soreq wrote, “El Al demands immediate compensation of $100 million for damage caused to El Al due to decisions by the state, as was done for other industries in the economy.”
In the letter, Soreq details El Al’s recovery plan, including selling 35% of its planes and reducing its fleet from 45 to 29 planes, due to a 30%-60% cut in activities, compared with before the COVID pandemic.
Sorek wrote that reducing the fleet would lead to, “adjusting the workforce to commercial activities, and this measure of cutting the fleet will have major repercussions on the size of the company’s work force.”
In response to the Ministry of Finance’s demand that El Al sell a significant part of its frequent flyer loyalty club, Soreq said that a number of organizations have expressed interest in the club but its operations will depend on the size of the activities of the company.
In addition, the company said that it has agreed arrangements on new financing for its planes. Soreq wrote, “We come to these negotiations at a low but we are encouraged by the understanding for the company’s circumstances and our requests from the parties involved.”
He also explained that the postponement of the public offering to raise $105 million, at the end of July, was done following the recommendations of the underwriters.
He detailed the assistance granted by governments worldwide to airlines such as in Europe and also presented measurements for the recovery of the airline’s activities.
Soreq estimates the assistance to El Al at $9.5 million per aircraft and claims that El Al’s rivals overseas received at least 50% more assistance, per aircraft on average.
El Al urges the government to adopt the “Green Passport” for aviation, which would allow it to compete and remain stable over time, and to allow overseas tourists into Israel.
El Al asks to complete the assistance process by October 15.
In the letter, Soreq did not relate to the offer of a $50 million balloon loan.
Attached to Soreq’s letter to the Ministry of Finance was also a letter from El Al controlling shareholder Kenny Rozenberg committing to work on behalf of El Al. The letter said, “I take full responsibility as part of proper corporate procedure to protect its (El Al’s) stability, nurturing and growth, especially during this time. My commitment to El Al is no small matter. El Al is an enterprise that requires major long-term investment.”
Rozenberg recounted that he had initially invested $108 million in the airline and then another $55 million, and plans to meet his commitments to invest a further $43 million.