El Al denies rejection of bailout plan, says still negotiating

El Al denied media reports on Friday that it had rejected the Finance Ministry’s latest bailout proposal, stating that it had only “suggested adjustments” to the revised plan.

According to a new proposal received by El Al management earlier this month, the government is willing to offer a $250 million loan to the Israeli flag carrier.

In addition, El Al would issue shares worth $150m., backed by a government guarantee to purchase shares that are left unsold. The agreement ultimately could see the state acquiring approximately 60% of the company’s shares and becoming the majority shareholder.

On Thursday, however, several Hebrew-language media outlets reported that El Al had agreed on terms with a financial institution to provide a previously-discussed $400m. loan, while issuing a more modest number of shares that would not lead to its temporary renationalization.

In a statement to the Tel Aviv Stock Exchange, the struggling airline clarified that it had not rejected the combined plan of a government-secured loan and share issue.

“Yesterday, the company sent to the Finance Ministry suggested adjustments to the combined plan, which the company understands as addressing difficulties that it sees in the combined plan, as proposed,” El Al said.

The airline added that it intends to continue discussions with the Finance Ministry to receive state support, while again cautioning that “there is no certainty that one plan or another will be agreed on, or that the conditions attached will be possible to achieve.”

The revised rescue plan, developed after months of unsuccessful negotiations, is conditional upon severe cost-cutting measures and layoffs expected to affect one-third of the airline’s 6,500-strong workforce.

Any agreement reached by El Al management and Finance Ministry officials will also require the approval of an Israeli bank, the El Al workers union, the government and the Knesset Finance Committee.

Addressing a Knesset committee earlier this month, a senior Finance Ministry representative emphasized that the government has no intention of renationalizing the airline after 16 years of private ownership, even if it acquires a majority of shares in the carrier.

“I don’t think there is anyone who thinks that the state should be the owner of an airline, so the idea of nationalization is not on the agenda,” said Finance Ministry economist Eli Morgenstern.

“The shares will be transferred to a trustee for a period of three to five years, at the end of which he will sell them. Following the cash flow, the company will find it easier to receive a loan for the remaining $250 million.”

On Wednesday, El Al said it would extend its halt on all scheduled passenger flights to and from Israel until July 31, with the exception of cargo flights and one-off services. The previous date announced by El Al earlier this month was June 30.

Some 6,000 of the carrier’s 6,500 staff are also scheduled to remain on unpaid leave until July 31.