Israel hands El Al another $30m, loans to Arkia, Israir
Israel’s government approved on November 21 additional financial aid for its beleaguered airlines not exceeding USD44 million. The state will offer El Al Israel Airlines, Arkia Israeli Airlines, and Israir three-year bonds that do not accrue interest, the country’s Ministry of Finance said in a statement.
El Al will receive USD30 million, on condition that controlling shareholder Kenny Rosenberg invests the same amount. The flag carrier had been seeking USD100 million in “compensation” for damages caused by the state’s tough travel restrictions, but the ministry described this as “a questionable demand”.
At the end of the three-year period, El Al will have to decide whether to repay the debt to the state, interest-free, or convert it into equity held by the state at a price representing a 7.5% discount on the share price. If the state obtains the shares, it will sell them within 18 months. It would not hold more 24% of the equity and would not have voting rights.
Arkia and Israir opted not to take part in the aid scheme for now, instead reaching agreements with the ministry to receive state-guaranteed loans. However, the state retains an option to provide USD7 million to each of the smaller carriers in an outline similar to that of El Al except for the equity conversion as these companies are not publicly traded.
Finance Minister Avigdor Lieberman commented that the additional aid “will allow Israeli airlines to overcome the difficulties the industry has experienced in the last 20 months and strengthen their capital structure.”
Transportation Minister Merav Michaeli opined that the plan balances the government’s responsibilities with those of the airlines’ controlling shareholders, adding: “The outline we have presented will benefit the Israeli public first and foremost and will ensure the stability of the companies and their employees.”
Israel’s borders have been largely closed to foreign tourists since March 2020, but from the start of November Covid-vaccinated visitors have been able to enter the country within six months of their last dose.
The latest state assistance follows a deal in May in which the government purchased flight tickets for security staff for twenty years ahead in exchange for a USD210 million advance for El Al and USD16 million to Israir.