Israel's Flagship Airline El Al to Lay Off 200

The airline warns that the layoffs are only a 'first step' in cost-cutting move; El Al employs about 5,800 people, of whom 2,000 are temporary workers.

El Al plans to lay off some 200 employees who were hired on a temporary basis or on personal contracts, as the airline seeks to reduce costs and cope with growing competition.

Israel's flagship carrier announced the layoffs on Tuesday, adding that it is also planning cost-cutting measures to reduce management overhead.

El Al employs about 5,800 people, of whom 2,000 are temporary workers.

"El Al has been contending for some time now with the difficulties in the aviation industry both globally and in Israel in particular," said CEO Eliezer Shkedi. "The company has to continue taking efficiency steps in order to adjust operations to changing market conditions."

The airline warned that the layoffs were only a "first step" and said it planned to hold talks with the Histadrut labor federation and the El Al workers committee regarding their collective labor agreement and "necessary steps" to reduce costs and improve management.

The layoffs come less than two weeks after the airline said the First Israel Mezzanine Investors Fund was in talks to buy a joint controlling stake. The private equity fund is reportedly looking to invest $60 million in El Al in exchange for a 42% stake. If the deal goes through, Knafaim Holdings, a company controlled by the Borovich family, would cede control of the carrier to FIMI.

However, FIMI has conditioned putting the first tranche of capital into El Al on the airline signing a new collective bargaining agreement with its workers on terms that satisfy the fund.

El Al unions signaled they would fight the measures. "Management is harassing those with the lowest salaries and the weakest group of workers, most of whom earn no more than NIS 5,000 a month," said Asher Ederi, chairman of the airline's workers committee.

El Al shares were up 3.8% in mid-afternoon on the Tel Aviv Stock Exchange, at about 57 agorot.

The airline posted a $7.7 million net profit in the first nine months of 2012 on revenue of $1.56 billion, turning around from a loss of $42 million during the same period in 2011.

The International Air Transport Association said in its December outlook that 2013 would see 4.5% growth in passenger markets and 1.4% growth for cargo demand globally, but El Al and other Israeli carriers face heightened competition if Israel goes ahead with plans to sign an Open Skies agreement with the European Union, which would open up the market to more players.  

Bloomberg