El Al, Israel’s largest airline, is preparing to fire one-third of its employees. Workers who are in danger of dismissal will be notified by human resources Monday.
According to the collective bargaining agreement signed with management in July, the layoff process is contingent upon El Al receiving a state-backed loan from banks. Even after that, the unions reserve the right to swap 15% of the workers on the list of intended layoffs at their discretion.
El Al is in advanced talks with a group headed by Bank Leumi and Israel Discount Bank for a $300 million loan, to be repaid with 5% interest over five years. The state will guarantee 82.5% of the loan. The effective interest for the banks will be 28.5%. Analysts believe Leumi and Discount will try to add Migdal Insurance and Financial Holdings to the group of lenders. The talks made progress after El Al raised $77 million last week in an options sale. Kanfei Nesharim, El Al’s controlling shareholder, provided $50 million of that amount.
The loan is intended in part to refund ticket holders whose flights were cancelled. Analysts believe that the remainder of the loan has been reduced by 50% since El Al released its financial reports for the third quarter of 2020, when it was $240 million. Upon receiving the loan, El Al will begin repaying its debts to suppliers such as hotels.
Meanwhile, the exodus of company executives is picking up steam. Gil Bar, El Al’s internal auditor, announced his resignation after nearly 12 years on the job; Lior Tanner, CEO of El Al’s frequent flyer club, resigned Thursday after nine years at the company, seven of them running the club, which is one of the company’s only profit sources.
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Another departure is Yossi Barazani, VP of maintenance and engineering, who announced his resignation late last year but was persuaded to remain through May. Amir Rogovsky, VP of client services, is also leaving. He will be replaced by Oren Cohen-Butansky. Company officials denied speculation that Yoram Elgrabli, VP North and Central America, will quit, too.
El Al responded with a statement: “El Al is starting to implement the company’s recovery plan after the coronavirus. Some of the plan, including downsizing, will be done sensitively and respectfully, in partnership with the Histradrut labor federation and in accordance with signed labor agreements. El Al Management is in a process of growth and renewal during which managers are changing. We are very grateful to those who were a significant part of El Al until today, and are preparing for challenges before us with renewed forces. El Al is careful to handle all personal matters personally with workers and managers and not via the media.”