El Al reportedly set to seek $700m government loan to survive virus crisis

El Al estimates it will need some $700 million to stay afloat as the coronavirus crisis batters the aviation industry, and will seek that amount of aid from the Finance Ministry, according to a Tuesday report.

A drastic quarantine directive announced on Monday requiring all incoming travelers to self-isolate should essentially shut down tourism to Israel.

The estimate assumes the airline is almost completely grounded for the next three months, the outlet Calcalist reported.

The emergency financing will be given in the form of a loan, not compensation, and El Al will have to provide a guarantee, which will be a challenge for the company given its current debts. The airline is in the process of modernizing its fleet at a cost of $1.6 billion.

The government will also ask El Al to present a plan to significantly streamline its operations, the report said, without specifying its sources.

The El Al union and umbrella union Histadrut are examining steps the airline could take to streamline its workforce while minimizing layoffs.

El Al employees said they were prepared to lose 15% of their wages if there were no layoffs, which the company’s management rejected.

El Al, the Israeli airline, said it would continue to offer international flights, but with reduced services. Prime Minister Benjamin Netanyahu has pledged support for El Al, which began layoffs after massive revenue losses due to the coronavirus outbreak.

The airline company laid off hundreds of employeescut wages and froze hiring last week.

El Al Airlines Boeing 737s are pictured on the tarmac at Ben Gurion International Airport near Tel Aviv on March 10, 2020. (Jack Guez/AFP)

The company’s share price on the Tel Aviv Stock Exchange has fallen more than 30% in the past month.

On Sunday, even before a sweeping quarantine order on all arrivals was issued, El Al reported to the Tel Aviv Stock Exchange that it expects revenue to drop by $140-160 million for the period. from January to April 2020 due to the suspension of several lines and a drop in demand in others due to the global epidemic.

El Al said the revenue decline for the first quarter would amount to $80-90 million, while it expected losses for the same period of $70-90 million. Losses for the January-April period are expected to total $80-90 million. El Al said the losses would be offset to some extent by reductions in operating expenses.

Meanwhile, the effect of Monday’s quarantine decision on Israel’s imports and exports was still unclear, in part due to the closure of government offices for the Purim holiday on Tuesday.

A roughly equal amount of imports and exports transit by sea and air, said Yifat Alon Perel, Minister of Economic and Commercial Affairs at the Israeli Embassy in Washington, DC.

“If there is some sort of stoppage in imports and exports, that will be a big problem,” said Alon Perel. “For many Israeli companies, a large percentage of their revenue comes from exports.”

Some companies may shift trade to ships, but for companies with contracts that require trade in a short period of time, the slower sea route may not be an option.

The limited two-week duration of the quarantine order may be linked to concerns over imports and exports, Alon Perel said.

Big companies and banks probably have enough capital to weather the storm, but the halt in imports and exports could be a blow to small businesses, said Yaniv Pagot, economist and chief strategy officer at Ayalon Group, an Israeli institutional investor.

The biggest concern for Israeli industry right now is disruptions to supply chains and access to raw materials, Pagot said.

The tourism and aviation industries are still likely to suffer the most from the virus outbreak.

Passengers wear masks to help protect against the coronavirus, at Ben Gurion Airport near Tel Aviv, Israel, Sunday, March 8, 2020. (AP Photo/Ariel Schalit)

Ben Gurion Airport saw a 60% reduction in the number of travelers over the past 10 days, from 52,239 entries on March 1 to 21,780 on Tuesday, the Israel Airports Authority said.

The authority publishes daily figures for entries during the crisis, instead of its usual monthly tally. He said Ramon Airport in southern Israel will continue to operate at night, contrary to previous reports.

Ben Gurion Airport will close half of its main international terminal and reduce its workforce by 70%.

Two of Terminal 3’s five check-in areas will be closed immediately, the country’s main airport said on Tuesday, as the workers’ union announced it was turning into “Football Yom Kippur.”

Netanyahu announced Monday evening that anyone arriving in the country must self-quarantine for 14 days. The decision was essentially meant to shut down tourism to Israel, as only non-citizens with a place to quarantine for 14 days will be allowed into the country.

Those already in Israel will have to leave “in an orderly manner in the coming days,” the Health Ministry said in a statement. Many Israelis also had to cancel travel plans rather than face two weeks of quarantine upon returning home.

The Finance Ministry estimated that the new order would cost Israel some 4.9 billion shekels ($1.4 billion) per month.

A tourist wearing a face mask to protect against the coronavirus at the Western Wall in Jerusalem’s Old City on March 5, 2020. (Olivier Fitoussi/Flash90)

El Al on Friday canceled some flights to San Francisco and a number of European cities, with a senior company official calling the virus outbreak an “unprecedented crisis.”

The company was also to cancel its services to Munich, Budapest, Amsterdam, Brussels, Bucharest, Vienna and Marseille.

The International Air Transport Association (IATA) warned on Thursday that the total impact on industry revenue could be between $63 billion and $100 billion.

There have been 58 confirmed cases of COVID-19 in Israel so far, most of them contracted by travelers returning from abroad. The government has for weeks ordered measures to clamp down on foreign entries and impose home quarantines.

Some have criticized the measures as draconian and diplomatically harmful, but officials have defended them as helping to keep the virus at bay. Some 22,000 Israelis are already in quarantine, the Health Ministry announced Monday morning.

Unlike other quarantine orders, which were indefinite, Netanyahu said the sweeping new quarantine order would be in place for two weeks. He added that other decisions were being taken by the government to protect the economy, although he did not give details.

About Chuck Keeton

Check Also

Youthentity Plans Second Year of Virtual Fundraising | New

While Youthentity’s 14th Annual Roast Pork Fundraiser will be held virtually again for the second …