El Al CEO says says new investors eyeing airline after FIMI deal collapses
$75 million deal fell through because of management's failure to reach new wage accord with union, confirms Elyezer Shkedy.
El Al Airlines, the country's flagship carrier, has been approached by unnamed investors interested in taking a strategic stake in the carrier after an agreement with the FIMI private equity fund collapsed some two weeks ago, CEO Elyezer Shkedy said on Wednesday.
"There is interest on the part of serious groups to come in as strategic investors in El Al," he told TheMarker on the sidelines of a ceremony at Ben-Gurion airport marking the entry into service of the airline's new Boeing 737-900ER jet.
The comment was Shkedy's first since FIMI pulled out of an agreement to invest $75 million in the airline in exchange for a controlling stake. He declined to comment on why the deal collapsed, apart from confirming that the failure of El Al management's to reach a new wage accord with unions was the central factor.
El Al is facing growing competition, with its share of Ben-Gurion traffic falling the first nine months of the year to 31.7% from 33% the same time in 2012. And, with the government's signing the Open Skies agreement with the European Union earlier this year, the carrier will have to operate under even tougher conditions as new airlines are gradually allowed to enter the market.
Shkeldi said that on Tuesday El Al had signed an agreement to purchase another two 737-900ERs from Boeing, beyond the six it agreed to purchase for $430 million. El Al CFO Nissim Malki said the company would issue bonds in the United States to finance the new planes. Shkedi said the financing El Al had received from Israeli and foreign banks to buy the airplanes attested to the financial sector's faith in the airline and its potential.
The new plane will make its maiden flight on Thursday from Ben-Gurion to Paris. Shkedy said that when El Al gets delivery of the next four of the jets, in the summer of 2014, the airline will use them for low-cost flights. He refused to respond to a question about whether he would stay at El Al after the end of this year, when his current contract is due to expire.
The Boeing 737-900ER is considered the most advanced narrow body passenger jet in the world. It will operate on El Al's short- and medium-distance routes to Europe, with 16 seats in business class and 156 in economy. All passengers will have electricial outlets and USB connections within reach of their seats.
Meanwhile, a source told TheMarker on Tuesday that El Al is weighing whether to create a subsidiary to handle the frequent flyer customers in its various club programs, but is encountering opposition from unions. At a meeting last week, union officials told management that El Al employees should handle the work, and there was no need to set up a subsidiary company.
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