Published on : Monday, June 1, 2020
The abnormality of El Al receiving government aid have declined after talks between management and labor stalled over pilot demands for a 25% stake in the airline in exchange for concessions.
Israel’s flag carrier must reach a new collective bargaining agreement with employees that meet the terms it promised the Finance Ministry in exchange for government guarantees for up to 82.5% of a $400 million bank loan.
El Al has suspended nearly all passenger flights in the wake of the coronavirus pandemic until at least June 20. Its auditors posted a “going concern” warning on its latest financial report.
The airline promised the treasury it would achieve $400 million of annual cost savings by cutting 2,000 of 6,500 employees, including 150 pilots. The remaining pilots will take a pay cuts, and the salaries of top executives and board members will decline by 25%. El Al will end service on money-losing routes and reduce flight frequency on others. It will also sell off and then lease back 17 of its Boeing jets.
The talks have been complicated by the pilots’ decision to split off from the El Al Workers Council and conduct their own negotiations. They contend that the council, led by Sharon Ben-Yitzhak, wasn’t effectively representing their interests and was negotiating a package under which 20% of the $550 million in wage savings over the life of the agreement would be borne by the airline’s 550 pilots.
The pilots say that if they have to bear the brunt of the cost-cutting, in contrast to the controlling shareholders, the pilots should be able to share in future profits by way of an option giving them 25% of the company. At the same time, they are refusing to give up benefits like free airfare for themselves and their immediate families.
Sources said El Al’s controlling shareholders – the Borovich family, which controls their stake through the publicly traded Knafayim Holdings – were unprepared to give the pilots such a big stake in the carrier. The treasury agreement calls for them to inject 100 million shekels ($29 million) into the airline to strengthen its capital base.