El Al employees will give up salary increases until December 2007 in exchange for the management's forgoing demands to implement cuts and efficiency measures, according to a new work agreement being hammered out between union and management representatives.
The accord is being drawn up in light of the national carrier's wretched financial performance in the first half of 2006. High fuel prices and increased competition, among other issues, led to the poor results.
The new agreement provides for cost-of-living increases but not a graduated salary rise of 10 percent by 2010 that the union had demanded. The revised contract will be part of a wider plan by CEO Haim Romano to cut operating costs significantly. Managers were asked to review all spending to determine where cuts could be made. Dismissals or wage cuts are not being discussed at this stage, but the possibility of reducing or suspending unprofitable routes has been raised.
El Al lost $12.4 million in the first quarter of 2006, and second-quarter results are expected to be even worse: the rise in fuel prices cost the carrier an additional $18 million, despite having taken hedging action.
A senior El Al official told TheMarker that "the $64.1 million in net profit recorded in 2005 will be completely wiped out in 2006."
The airline's board of directors meets today to discuss the rise in fuel prices and the worsening security situation, after which it is expected to issue a profit warning.
"The company publishes its financial results only on the dates specified by law, and does not publish or pay attention to figures except at these times," the company said yesterday in a statement. "The company does not release details about negotiations between management and labor."
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