TEL AVIV (Reuters) – The Israeli government will require that El Al Israel Airlines ELAL.TA is conducting an overhaul, including layoffs, before agreeing to throw a lifeline to the airline, which is lacking cash, officials said Sunday.
El Al, Israel’s airline, is seeking $ 400 million in government-backed loans to help overcome the coronavirus crisis as foreigners are banned from entering the country and incoming Israelis must be quarantined.
The airline has suspended passenger flights until at least the end of May, while around 6,000 of its employees have unpaid leave until June 30.
However, the government argues that the airline’s problems, including a bloated workforce, high salaries and poor balance sheet, began long before the COVID-19 outbreak.
Cabinet ministers and senior Treasury officials drafted a plan late into Sunday to help them feel confident that the company would be able to repay a loan.
The next step is to submit the airline’s proposal, said a ministry spokesman.
El Al declined to comment.
A source close to the talks said the government’s demands included an injection of 100 million shekels ($ 28.5 million) of funding to the airline from its major shareholders, a downsizing commitment and also a state stake in the company.
El Al’s largest shareholder is Knafaim Holdings KNFM.TAthat is controlled by a family. Knafaim was not immediately available for comment.
Workers against layoffs protested outside the ministry on Sunday.
According to the ministry, El Al has presented its own plan that provides for an unknown number of layoffs. All layoffs would have to be approved by the airline’s union, but that is still pending, 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 liquidating El Al, which has delayed the release of fourth quarter financial results twice.
The airline said last month it was in advanced talks with an Israeli bank to obtain a loan that is partially backed by government guarantees.
Reporting by Steven Scheer; Arrangement by Toby Chopra and Pravin Char