El Al in talks for a bank loan backed by the government
El Al Israel Airlines has said to be in talks with Israel Discount Bank regarding a US$350 million loan with state guarantees for 75-80% of the loan.
The airline has felt a particularly hard hit from the coronavirus pandemic, with all scheduled passenger flights being suspended until May 2. While passenger flights are grounded, the carrier is still performing rescue and cargo flights.
The loan is set to come with several demands regarding future operations. El Al is requested to reduce its activity by 25% for the next two years and ensure US$300-350 million in annual cost savings. Reduction of activity measures range from cuts to its flight schedule to a reduction in the volume of food produced by Tamam Aircraft Food Industries.
The carrier has outlined a need for US$200-300 million dollars to recover from the impact of coronavirus pandemic. Currently, over 90% of El Al’s workforce is on paid leave until May 31. The company is reported to have planned layoffs for 1,400 to 2,000 employees out of its total workforce of about 6,360.
El al will also need to reduce its fleet size from 45 aircraft (planned to grow to 48) to 35-38 airplanes, 16 of which would be Boeing 787 Dreamliners, cargo planes (El Al recently converted 2 two passenger 777 aircraft to carry cargo) and narrow-body aircraft serving shorter routes.
Earlier in the month, Treasury of Israel denied a loan request for the struggling carrier. The denial came as the officials in Ministry of Finance did not believe in El Al’s ability to repay the requested loans.
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