Phoenix, an Israeli provider of insurance and financial services, has exercised its right to buy a stake in El Al Israel Airlines’ Matmid Frequent Flyer Club, acquiring 19.9% of the loyalty business, the companies said in a Tel Aviv Stock Exchange filing on September 13.

Phoenix had exercised an option that had been awarded to it in March, when the then cash-strapped, privately-owned flag carrier signed a non-binding deal securing a USD130 million loan from the insurer. El Al had put up its frequent flyer club as collateral for the loan and “as part of the financing transaction” gave Phoenix an option to buy up to 25% of Matmid by the end of 2027.

“In respect of the aforementioned realisation, it is expected that the company’s coffers will receive a total of about USD14 million,” El Al said, adding that it will now own 80.1% of the allocated share capital of the loyalty company, and that it will record a gain of about USD63 million in its third-quarter financial statements.

El Al also said that with the conclusion of the deal it will not need to raise additional capital.

Itzik Eliav, the carrier’s CFO, referred in a separate statement to “the club’s business development potential as a lever for growth and profitability” and said that “the realisation will allow El Al to comply with its agreement with the state” on securing an alternative funding channel.

In an earlier disclosure, on September 11, El Al announced that it plans to repay a USD45 million loan it took from the government during the pandemic by December 20, two years ahead of schedule, thanks to an improving travel environment. However, a deadline for it to carry out a planned USD62 million share offering has now been postponed to April 1, 2023.

The repayment will eliminate or ease many spending restrictions for El Al, allowing it to lease new aircraft, update its route network, add staff, invest in working capital, and develop new income channels. But it will still not be allowed to pay dividends or buy back its own shares until 2028.

The airline and the ministry also agreed that “the state will advance payments for aviation security expenses to the company amounting to USD20 million and will transfer them to the company in December 2022. [These payments] will be reimbursed by the company until April 1, 2023, with any extension beyond this date subject to the approval of the Ministry of Finance.”

“Out of a desire to consolidate the company’s growth and the improvement in its results, and in order to create management flexibility among other things through investment in the company’s working capital, and also in light of rising demand, El Al has agreed with the Ministry of Finance an acceleration in the process of repaying the bond held by the state amounting to USD45 million,” said CEO Dina Ben Tal Ganancia. She added: “I am confident that the move will lead to an improvement in El Al’s ability to grow and deal with a competitive and changing market.”