Israel to demand changes at flag carrier El Al before bailout loans

The Israeli government will demand that El Al Israel Airlines carries out an overhaul, including layoffs, before agreeing to throw a lifeline to the cash-strapped airline, officials said on Sunday.

El Al, Israel's flag carrier, is seeking state-backed loans of $400 million to help it through the coronavirus crisis, as foreigners are barred from entering the country and incoming Israelis must enter quarantine. The airline suspended passenger flights until at least the end of May while about 6,000 of its workers are on unpaid leave until June 30.

However, the government argues the airline's problems, including a bloated workforce, high salaries, and a weak balance sheet, began well before the COVID-19 outbreak. Cabinet ministers and senior finance ministry officials drafted a plan late into Sunday that would help them feel confident the company would be able to repay a loan.

The next step is to present the proposal to the airline, according to a ministry spokesman. El Al declined to comment.

One source close to the talks said the government demands included a cash injection into the airline of 100 million shekels ($28.5 million) by its main shareholders, a commitment to reduce its workforce, and also the state receiving a stake in the company. El Al's biggest shareholder is Knafaim Holdings, which is controlled by one family. Knafaim could not be immediately reached for comment.

Workers opposing layoffs held a protest outside the ministry on Sunday. El Al has presented its own plan that includes an unknown number of layoffs, according to the ministry. Any layoffs would require approval by the airline's union, but this is yet to happen, an El Al spokesman said earlier in the day.

A spokesman for Finance Minister Moshe Kahlon rejected Israeli media reports that the minister was considering dissolving El Al, which has twice delayed publishing fourth-quarter financial results. The airline said last month it was in advanced talks with an Israeli bank to receive a loan that will be partly backed by government guarantees.

($1 = 3.5087 shekels)

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