El Al Israel Airlines (LY, Tel Aviv Ben Gurion) said reaching an agreement with unions is a precondition for the government to guarantee up to 82.5% of a critical USD400 million loan for the flag carrier. But pilots have now issued a demand for a 25% stake in the airline, Haaretz reported.
Negotiations between the airline and unions to reach a new collective bargaining agreement with employees have stalled over the pilots' demands for the stake in exchange for concessions.
The ongoing coronavirus pandemic has grounded almost all of El Al's passenger flights until at least June 20, and, as previously reported, its auditors attached a going concern warning to its 2019 annual report released on May 14. El Al shares have lost around 60% of their value during 2020.
To obtain the loan the carrier has pledged USD400 million annual cost savings by, among other measures, laying off 2,000 of its 6,500 employees. That includes 150 out of 650 pilots, with those who remain taking pay cuts.
In retaliation, the pilots have split from the El Al workers council to conduct their own negotiations. They accused the council of negotiating a deal in which they would be forced to bear 20% of a planned USD550 million in overall personnel savings. If the cost-cutting should impact them so heavily in contrast to the controlling shareholders, they argued, then they must be allowed to share in the carrier's future profits.
Aside from the layoffs, the Israeli state has demanded that El Al's owners invest a further ILS100 million shekels (USD28.3 million) or dilute their shareholding. Knafaim Holdings Ltd currently holds the biggest stake in the company, at 35.3%, with entrepreneur Pinchas Ginsburg owning the next-biggest, 7.97%.
Knafaim Holdings is unwilling to give the pilots such a large stake, sources told Haaretz.
Meanwhile, the Israel Airports Authority has suspended El Al's cargo flights because of debts owed to the authority, Reuters reported. This vital source of revenue during the current crisis was curtailed starting from 1800L on June 2.
Debts to the authority amount to around ILS60 million (USD17 million), a source told the news agency. Negotiations to resolve the issue have involved Miri Regev, who became transport minister on May 17.
