Gov’t offers $250m. loan in new El Al bailout plan
Prime Minister Benjamin Netanyahu and Finance Minister Israel Katz also announced new measures to ease the financial crisis.
By EYTAN HALONAn Israeli flag is seen on the first of Israel's El Al Airlines order of 16 Boeing 787-9 Dreamliner jets, as it lands at Ben Gurion International Airport, near Tel Aviv(photo credit: REUTERS/AMIR COHEN)
The Finance Ministry proposed a new plan for the bail out of struggling Israeli airline El Al on Sunday, combining a government-secured loan and a major share offering by the carrier to ensure its future.According to the revised proposal received by El Al management, the government is willing to offer a $250 million loan to the Israeli flag carrier. In addition, El Al will issue shares worth $150m., backed by a government guarantee to purchase shares that are left unsold.Any government-bought shares would be held and subsequently sold by a trustee by a specific date.The plan represents a significant shift in strategy following months of unsuccessful negotiations between El Al and the Finance Ministry for a $400m. government-backed loan to bail out the battered company.Should the vital bailout plan proceed in its latest form, it will require approval by the airline, government and the Knesset’s Finance Committee.In addition, the plan is conditional upon severe cost-cutting measures and layoffs expected to affect 2,000 workers, approximately one-third of the airline’s workforce. The cuts will require the approval of El Al’s workers union.In a statement to the Tel Aviv Stock Exchange, El Al said it would evaluate the new rescue proposal, and also examine whether efforts to secure the previously-negotiated plan had been exhausted.“There is no certainty that one plan or another will be agreed, or that the conditions attached will be possible to achieve,” the airline said.In mid-May, El Al announced that it would be extending its halt on all scheduled flights to and from Israel until June 20, except for cargo flights and one-off services. Approximately 6,000 of the airline’s 6,500 employees have been placed on unpaid leave until June 30.As the government seeks to encourage the return of employees to work across different sectors, Finance Ministry officials informed the Knesset’s Finance Committee that its NIS 6b. ($1.73b.) employer incentive program to encourage re-employment is expected to result in the return of only 80,000 additional workers to the workforce.
Last week, the Finance Ministry expressed its intention to extend the eligibility criteria for “return to work” grants to include businesses who brought employees back to the workplace from April 19, rather than the previous date of May 1.Under the framework of the incentive proposal, discussed by the Finance Committee at its Sunday meeting, employers will receive a NIS 3,500 grant for every employee who returned to the workplace during late April and May, and NIS 7,500 for every employee who recommenced work after June 1.More than 300,000 Israelis have formally reported their return to work to the Israeli Employment Service since restrictions were first eased on April 19. At the peak of the coronavirus crisis fallout, more than 1.14 million Israelis or some 27.4% of the workforce were recorded as claiming unemployment benefits.In welcome news for hundreds of thousands of workers still on unpaid leave, Prime Minister Benjamin Netanyahu and Finance Minister Israel Katz also announced on Sunday that eligibility for unemployment benefit would be extended by an additional 35 days.Rather than the eligibility period starting from March 15, unpaid leave days will now only count from April 14, when restrictions on the economy were first eased.Furthermore, Netanyahu and Katz announced that they would remove tariffs and purchase taxes on a series of products, including cellphones, clothing, baby products, consumer electronics and electric home appliances. The move is estimated to benefit consumers to the tune of NIS 1.45b. ($420m.) per year.“The goal here is to move the economy forward, to move the wheels, to make it easier for Israeli citizens,” Netanyahu said in a statement.Earlier in the day, Yisrael Beytenu held a faction meeting in Tel Aviv with small businesses harmed by the coronavirus. Party head Avigdor Liberman said the government had no plan for helping businesses hurt by the virus. Liberman said the government was handling the issue unprofessionally and banks were being too conservative.“We will raise this issue on every possible stage,” Liberman said.In the latest cry for government assistance from sectors impacted by the coronavirus, leaders from the conference and exhibitions industry urged Health Minister Yuli Edelstein and the government to approve the reopening of congress centers and exhibition halls.A plan developed by industry leaders has already been approved by the Finance and Economy ministries, but is still pending Health Ministry and government approval.“My industry colleagues and I feel like hostages paying the price for those who do not follow the Health Ministry guidelines,” said Mira Altman, CEO of ICC Jerusalem, previously known as Binyanei Hauma.“Just before the entire industry collapses and we have to lay off thousands more, we urge the Health Minister and the Israeli government to immediately approve the outline for the reopening of the conference and exhibition industry, in order to allow us to prepare properly.”Gil Hoffman contributed to this report.
