El Al Gearing Up to Place 75 Percent of Staff on Unpaid Leave

Israel's relatively speedy move to block incoming traffic could make airlines shy of returning after the crisis, industry sources fret

Yoram Gabison
Hadar Kane
Reuters
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FILE PHOTO: Empty El Al Israel Airlines check-in counters are seen at Ben Gurion International airport in Lod, near Tel Aviv, Israel February 27, 2020.
Empty check-in lines at El Al counters at Ben-Gurion InternationalCredit: Amir Cohen, Reuters
Yoram Gabison
Hadar Kane
Reuters

The carrier El Al is preparing to put about 75% of its workforce, between 4,500 to 5,000 of its 6,400 employees, on unpaid leave through the end of June, it emerged on Wednesday. Employees put on involuntary unpaid leave because of the coronavirus crisis will be eligible for unemployment benefits from the state. The airline may even decide to suspend all activity and is meanwhile delaying the launch of new lines to Chicago (to June 28), Dusseldorf (July 30) and Tokyo (August 29)

How many employees wind up placed on leave will depend how many flights the company has to cancel. At the moment, it appears that El Al will be operating four flights a day, based on special demand.

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At this stage the company has yet to receive the blessing of the key Histadrut Labor Federation and of its own union, but the measures are thought to be accepted by employees.

On Wednesday, the airline announced that the mandatory 14-day quarantine to which people potentially exposed to the virus must submit will hurt its business significantly. At this stage, though, it cannot assess the extent of the impact. El Al will continue to adjust its operations and routes based on the demand for flights.

Following the Health Ministry directive mandating a two-week quarantine for anyone entering the country, an aviation industry source predicted Tuesday that the airline industry is going to be set back at least two years by coronavirus.

The Health Ministry's decree spurred airline after airline to announce that they were canceling flights. On Sunday, El Al, which already suspended some routes, said it expects a revenue decline of as much as $160 million between January to April. It had projected an impact of up to $90 million in the first quarter, with the revenue drop partly offset by lower expenses. El Al also announced some layoffs and has requested government aid, for which it is in talks with the Finance Ministry. Its share price has been declining since mid—November 2019 and lost 33% this year.

Rival airline Arkia said on Tuesday that it would divert some planes to the domestic Tel Aviv-Eilat route. Another Israeli airline, Israir, said Tuesday that it is suspending all international flights from March 14 through to month—end but its domestic flights remain unchanged.

Foreign airlines including the Lufthansa group, which includes Swiss Airlines and Austrian Airlines; Wizz Air; and Air France have suspended operations to Israel for a limited time.

Israel’s Airports Authority is considering limiting operations at the Ramon Airport near Eilat at night. Before the coronavirus crisis, 45 planes were landing at Ramon every week. Temps working at Ramon have been sent off and may not be rehired.

Israel’s main airport, Ben-Gurion International Airport, on Tuesday shifted to a "Yom Kippur schedule" due to the plunge in traffic. Typically all of Israel shuts down for the Jewish holiday of Yom Kippur, and the airport traffic drops to 30% of its usual volume.

It is impossible at this stage to project how Israel’s airlines will be impacted, but they clearly will be.

“The low-cost airlines operate on slim profit margins and massive flight volume. Several are likely to collapse," said a senior industry source. "Those that survive will cancel their lines to Israel, and won’t be quick to reinstate them given their losses from the speed at which Israel shut down incoming traffic.”

“Most countries were much more measured and didn’t shut down routes,” said the source. “These actions are likely to come back to haunt us later, when we’re trying to return to routine.... Those that come back will do so bit by bit.”

This means fewer flights to and from Israel, and higher prices, said sector sources.

Israel signed an "open skies" agreement with the European Union in 2012 after years of negotiations, and the cabinet approved it in 2013. The goal was to enable more flights between Israel and Europe, bringing more tourists to Israel and pushing down aviation prices. Since then, several low-cost airlines have launched routes to and from Israel, and competition has been effective - there are twice as many flights as before, and prices are lower.

There were 9.2 million Israeli departures from Israel in 2019, twice the number as of 2013.

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