Get the app today! Download iPhone App Download Android App

SUBSCRIBE

El Al Airlines Considers Public Bond Sale In Fight For Survival

Published on Nov 26 2020 12:30 PM in General Industry tagged: El Al

El Al Airlines Considers Public Bond Sale In Fight For Survival

El Al Israel Airlines is considering a bond sale to the public as it fights to stave off collapse after failing to reach a deal on a state-backed loan to help it recover from the COVID-19 pandemic.

Israel's flagship airline, which also reported a third-quarter loss on Wednesday November 25, had secured government backing for 75% of a $250 million loan conditional on the group slashing expenses and issuing $150 million worth of new shares.

The company held the share sale last month, resulting in the 27-year-old son of a US nursing homes tycoon taking a controlling stake. It also agreed with unions to cut 2,000 jobs and reduce the salaries of the highest paid.

But El Al said on November 25 that it has failed to reach an agreement for a loan with a financial entity and so is "considering an alternative of raising the loan by issuing bonds to the public."

"At this stage there are significant doubts about the continued existence [of the company] as a going concern," it added.

CEO Gonen Usishkin said that the airline is cutting costs to try to return to growth.

"However, without the support of the government, which will provide El Al with the necessary backing so we can advance the debt raising, El Al will have difficulty meeting its future obligations and will face the danger of collapse," he said.

Israel's finance ministry said that El Al had asked to change the terms of the loan guarantee, without giving details.

With Israel's borders shut to foreigners, El Al lost $147 million in July-September as it operated just a handful of flights. That compared with a net profit of $27 million a year earlier. Revenue plunged to $39 million from $647 million.

A month ago, the airline resumed flights for Israeli citizens to several destinations in the United States and Europe. Flights to Moscow are set to restart this week and flights to Dubai are slated to start next month. Usishkin said that he hopes to further expand operations.

Lone Bright Spot

The lone bright spot for El Al has been a drop in fuel costs and expenses, which declined 80% to $101 million in the quarter. However, it still owes $240 million of refunds to passengers who bought tickets prior to the flights being halted.

News by Reuters, edited by Hospitality Ireland. Click subscribe to sign up for the Hospitality Ireland print edition.

Share on Facebook Share on Twitter Share on LinkedIn Share via Email