El Al Israel Airlines on Wednesday reported a whopping loss of $147 million following a 94 percent drop in revenues for the third quarter of the year, as a second wave of the coronavirus “dramatically affected” operations of the company, causing it to halt regular passenger and cargo flights.
The third quarter financial statements came with a going concern warning– which expresses doubt regarding the firm’s continued viability — as did its financial statements for the first and second quarter of the year, with revenues plunging and losses ballooning due to the pandemic.
The nation’s flagship airline said the quarterly loss compared to a $27 million profit in the same July-September period a year earlier. Operating revenue for the quarter was $39 million, compared to $647 million in the same period a year earlier.
For the nine months ending September 2020, the company posted a loss of $391 million, compared to a loss of $28 million in the same period a year earlier. Operating revenue for Jan-Sept this year came in at $511 million compared with $1.66 billion in the same period in 2019, down 69%.
The continuation of the pandemic led to the “heavy loss” in the quarter, said El Al CEO Gonen Usishkin in the statement. He said he hoped El Al will soon be able to expand the number of destinations it has recently started flying to. The company was continuing to implement efficiency steps to get the airline back onto the growth path, he said. But without government assistance, the firm will find it hard to meet its obligations and will face “existential risk.”
The company had a negative cashflow from operations of $33.8 million in the third quarter of the year, compared to a cash flow of $6.7 million in the same period last year, and ongoing liabilities at the end of September 2020 were over $2 billion. The company owes passengers some $240 million for tickets that were not utilized, El Al said.
The aviation industry has been one of the most battered by the coronavirus, as social distancing, lockdowns and border closures have grounded flights. According to the IATA forecast, there has been a decline of hundreds of billions of dollars in the revenues of the airlines worldwide, and their aggregate loss is estimated at tens of billions of dollars.
Following restrictions on international travel. El Al suspended regular passenger flights in mid-March 2020. Since then, some flights have resumed to a limited number of destinations. The airline has placed most of its employees on furlough.
The impact of the crisis during 2020 is also evident in the data of inbound and outbound tourism from the State of Israel, El Al said in a statement. The volume of inbound tourism to Israel decreased in the first nine months of the year by about 76%, while the outbound tourism rate decreased in that period by about 81% compared to the corresponding period last year.
Since the start of the crisis the company has taken a number of steps to cut costs and improve cash flow – reducing its activity, increasing cargo activity when possible, outsourcing most of its employees, and cutting salaries of its executive board and the board of directors by 20%. The firm also came to agreements with banks to defer payments, and the lease agreements for two 737-800 aircraft were canceled.
As part of a government rescue package, the company sold shares for a total of $150 million and got state guarantees for 75% of a $250 million loan from banks. El Al said that to date, “no agreement” has been reached with a financing entity regarding the loan, so the airline is considering raising the loan via a sale of bonds to the public.
“As there is still uncertainty regarding the completion of the assistance, which is necessary to enable the company to deal with the consequences of the crisis, at this stage there are significant doubts” about the firm’s viability as a “going concern,” and the statements come with a warning to that effect.
Following the share sale, Kanfei Nesharim, controlled by Eli Rozenberg, became the controlling shareholder of the airline, with a 42.88% stake in the firm. The State of Israel owns a 14.37% stake, Knafaim Holdings Ltd. holds a 15.21% stake and the public holds a 27.54% stake, according to an El Al presentation filed Wednesday with the Tel Aviv Stock Exchange.
Usishkin, appointed to head the firm in 2018, will be leaving the post by January, and a new board of directors has been appointed, following the ownership change.