Treasury plans NIS 100 million loan guarantees to prop up Israir, Arkia airlines

Finance Ministry looking for ways to prevent collapse of airlines due to coronavirus crisis, similar aid to El Al held up due to carrier’s shaky preexisting financial situation

An Arkia Airlines plane at Ben Gurion Airport, file (Moshe Shai/Flash90)
An Arkia Airlines plane at Ben Gurion Airport, file (Moshe Shai/Flash90)

The Finance Ministry will offer the Israir and Arkia airlines NIS 100 million ($28.5 million) in state-backed loan guarantees to help the carriers avoid collapse amid the coronavirus pandemic, Channel 13 news reported Friday.

The ministry was working on a similar deal for El Al, but the issue was complicated because the airline was already in a poor financial state even before the crisis and banks view loans to it as too risky, the report said.

International air travel all but collapsed worldwide in the wake of the coronavirus pandemic. A late-April report from the International Air Transport Association announced an 80 percent reduction, and predicted over $300 billion in losses for the airline sector due to the crisis.

In Israel, there are only a handful of flights weekly, including a daily route to Newark, New Jersey, flown by United Airlines.

The ministry has put aside a fund to back up the loans to Israir and Arkia, which primarily fly routes to Europe, but would not divulge the amount so as to not reveal the state’s assessment of the risk they would not pay back the loans, the report said.

Saving these two smaller airlines would ensure that when air travel reopens there would be at least 14 operational aircraft flying out of Israel, no matter what happens with El Al.

Channel 13 said the Treasury was in talks with Bank Discount and Bank Leumi about providing El Al with loans, but negotiations had encountered “severe difficulties.”

The ministry was likely to demand that El Al take further steps to restructure, possibly consolidating its routes to focus on long-haul flights to the US and Far East. The report said it was not clear if the state would take a stake in the carrier in return for the aid.

El Al planes at Ben Gurion International Airport on April 12, 2020 (Flash90)

On Sunday, a court gave El Al airline the go-ahead to pull NIS 105 million ($30 million) from its employee pension and compensation fund in order to help cover its costs and avoid collapse.

The court ruled that the amount was not owed to employees, and could therefore be used in the company’s current emergency.

El Al had initially asked to have NIS 354 million ($100 million) of its NIS 413 million ($117 million) fund freed up for use.

The final figure marked a compromise reached between El Al, the Finance Ministry and the Histadrut labor federation.

The decision comes as El Al’s employees, most of them now on unpaid leave after the airline stopped nearly all its flights beginning in March, protested that the company’s owners and management were forcing the workers to shoulder the burden of the crisis.

“El Al’s employees are not victims of the coronavirus, they’re the nation’s, [Israeli] society’s and their employer’s most loyal workers,” El Al labor union chief Sharon Ben Yitzhak said Sunday. “While we’re being asked to give our money, the owners and management are refusing to become efficient, and come here to the court to take our money.”

Some 100 employees protested outside the courtroom on Sunday wearing black shirts that read, “Save us!”

Signs at the protest warned, “We will die from hunger before we die from the coronavirus.”

A security guard wears a face mask for fear of the coronavirus at Ben Gurion International Airport on March 11, 2020 (Flash90) 

Non-Israelis have been barred from entering the country and since April 12, all Israelis arriving in the country from overseas are required to be housed at state-run quarantine hotels for 14 days.

El Al is expected to resume flights in mid-May, the company said in recent days.

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