Israeli Labor Union Chief Threatens El Al Pilots to Accept Pay Cut

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An El Al plane takes off from Ben Gurion Airport near Tel Aviv, Israel, Tuesday, March 10, 2020.
An El Al plane takes off from Ben Gurion Airport near Tel Aviv, Israel, Tuesday, March 10, 2020.Credit: Ariel Schalit,AP

Amid fears that national carrier El Al is heading for insolvency as its pilots refuse to sign an efficiency agreement that would cut their salaries by $110 million a year, the Histadrut Labor Federation Chairman Arnon Ben-David threatened to revoke the pilots' union’s representative status and sign the agreement himself.

El Al is committed to signing efficiency plans with its four unions as a condition for receiving 75% government backing for a $250 million bank loan.

The pilots' union representatives refused to sign on Wednesday, arguing that the agreement would cut their salaries by 60%. Ben David countered that he wouldn’t allow 4,000 jobs to be lost if El Al goes under, which could happen if it doesn’t get the loan and its board concludes that it can’t pay off its debts.

On Wednesday, the board agreed that Chairman Eli Defes would have his salary cut 70% and the other members would have their salaries cut to the minimum required by law, all at their own request.

El Al had only $132 million left in its coffers as of March 2020, and that cash is mostly gone now. The airline owes customers some $300 million for canceled flights.

A protest of El Al workers in front of the Finance Ministry, Jerusalem, May 10, 2020.Credit: Ohad Zwigenberg

Following a law passed on Monday night, airlines now have 90 days or until August 14 to refund money for flights canceled between March 1 and August 31 of this year. Airlines are entitled to offer alternative tickets or credit.

As a loan condition, El Al has to undergo an efficiency plan that will involve laying off some 2,000 of its 6,300 employees and cutting expenses by $400 million a year. The company also has to sign labor agreements with four different unions representing its workers. Its pilots' union has been asked to agree to layoffs of 150 out of 650 pilots and salary cuts for the remaining employees.

The deal with the pilots is also one of the government’s conditions for dipping into the 300 million shekel surplus in its employee severance compensation fund.

The pilots began talks with a potential buyer for the company, the Rosenberg family from New York. They are reportedly willing to compensate the pilots for $110 million in salary cuts by granting them options. Initial talks with the pilots are intended to decrease the uncertainty facing the Rosenbergs given that they agreed to buy a controlling share of the company without conducting due diligence first.

The risk that El Al may have to seek protection from its creditors is prompting the Rosenbergs to expedite its preparations to submit an offer to El Al’s board or to its controlling shareholder, Knafaim, controlled by Tami Mozes Borovitz.

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