After accepting bailout, El Al signs layoff agreements with parts of workforce
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After accepting bailout, El Al signs layoff agreements with parts of workforce

Carrier battered by pandemic inks streamlining deal with maintenance, administrative staff; Israir announces agreement for state-backed loans

Grounded El Al planes at Ben Gurion Airport on April 6, 2020, during the coronavirus pandemic. (Moshe Shai/ Flash90)
Grounded El Al planes at Ben Gurion Airport on April 6, 2020, during the coronavirus pandemic. (Moshe Shai/ Flash90)

Israel’s struggling national carrier El Al signed agreements with administrative and maintenance staff in the early hours of Wednesday, in a streamlining deal expected to save the company some $88 million a year following the board’s acceptance of a government bailout.

According to a statement from the company, following overnight negotiations between the airline and unions, the number of staff members in both sectors will be reduced, with some employees offered early retirement and others a compensation plan.

The Globes financial daily said that around a third of the 4,000 people in those two departments would be laid off as part of the agreement.

The company also said that streamlining measures would include a focus on working digitally.

El Al workers protest against the company’s intention to withdraw funds from the workers’ compensation funds, in front of Bat Yam Regional Court on April 30, 2020 (Flash90)

Tensions at the airline have been high after it furloughed the vast majority of its employees and dipped into pension funds to stay afloat, during the coronavirus crisis.

It put 80 percent 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 airline has yet to reach an agreement with the pilots union, considered by many to be the most complex area of its labor negotiations.

The deal with maintenance and administrative workers is conditional on the implementation of the government bailout accepted by the company’s board on Monday that would likely give the state some 61% of the firm and stipulates efficiency steps that may lead to the firing of 2,000 workers.

Under the deal, the airline will get a $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 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 airline was privatized in 2004 and is currently controlled by Knafaim Holdings Ltd, which will see its shares diluted.

The empty arrival hall at the Ben Gurion airport on June 12, 2020. (Olivier Fitoussi/Flash90)

Last week, the airline stopped flights altogether after labor talks blew up between the pilots committee and management, with pilots refusing to man flights.

Management then furloughed 500 more staff, including 100 pilots, as well as maintenance workers, flight attendants and ground crews.

Hundreds of food service workers at El Al subsidiary Tamam, which produces kosher airline meals for multiple carriers operating through Ben Gurion International Airport, have also been furloughed, sparking concerns regarding the possibility of mass layoffs.

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 prior to the labor dispute had said it would continue to use its aircraft for cargo and occasional passenger flights.

A flight attendant of Israir Airlines wearing full PPE (personal protective equipment) prepares for takeoff from the Ben Gurion International Airport on June 16, 2020. (GIL COHEN-MAGEN / AFP)

Meanwhile, the Israir airline on Wednesday announced that it had reached agreements with financial institutions and will receive a bailout loan of NIS 140 million (approximately $40 million), with the state acting as guarantors for 75% of the amount.

The loan will be divided between Bank Mizrahi and the First International Bank so that the risk is minimized, the Ynet news site reported. The loan is to be paid back within seven years, with only interest paid for the first year.

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