El Al and Employees Finally Reach Agreement on $20m Efficiency Plan

El Al's management and employees have reached an agreement over the $20 million efficiency plan the airline will implement.

TheMarker has learned that worker representatives approved the scheme on the eve of Passover after management agreed to cut $4 million from management costs as part of the deal.

Another $6 million for the plan will come from the voluntary retirement or severance of 177 workers, of whom 37 have already left the company and 140 more will leave by the end of July.

This leaves $10 million more in cutbacks to come from the employees.

The new plan will be fully implemented by August 2008, and until then, management and workers will hold negotiations over a new collective agreement.

El Al's management wants a number of changes in the current collective bargaining agreement, while the employees are demanding a new long-term deal.

El Al has fallen on tough times for a number of reasons. The major cause is the rise in fuel prices in 2006 as a result of the jump in world oil prices.

Passenger numbers were also harmed last year by the Lebanon war in the summer. El Al estimated that it lost $80 million in revenues due to the war, and the airline showed a total net loss of $44.4 million for the fiscal year 2006.

The company has recently started reducing its number of flights and trying to save on other costs. El Al has canceled its regular scheduled flights to Larnaca and Istanbul, for example.

El Al had planned on stopping regular service to Cairo, but the state agreed at the very last moment to increase its share of the high security expenses on the Cairo route to 75 percent, and flights to the Egyptian capital are continuing for now.

Among the efficiency measures agreed upon are cutbacks in expenses and payments for ground and air staff.

Ground staff will be further subdivided into two groups - technical and administrative workers - while the aircrew cutbacks will be different for the pilots and flight attendants.

Examples in the long list of specific cost savings include lower productivity bonuses for veteran ground crews, and a freeze on automatic wage increases until the end of 2007.

Other measures will include lower expense reimbursements for travel on company business and higher prices for the meals provided to workers.

Shifts will be changed to better meet peak demand, and a number of job descriptions will be combined.

Air crews will also see a reduction in payments such as for canceled vacations, short notice, unplanned call-ups and shortened rest periods.

Negotiations over the efficiency plan went on for months and included the Histadrut Labor Federation. They were marked by ups and downs and a few serious crises - including strike threats.

Only at 5 a.m. on Friday morning April 1 did the sides close the deal after a marathon meeting, even though a number of El Al executives had already abandoned the talks.

"El Al's management and employee representatives are conducting a positive dialogue over the efficiency plan. El Al is not interested in conducting the negotiations with employees through the media," the company replied.