El Al will bring forward repayment of the $45 million loan it received from the state by two years. El Al’s management has agreed with the Ministry of Finance on repayment of the loan in full by this December instead of at the beginning of 2025. El Al’s motive in making early repayment is the removal of the restrictions imposed on it in the agreement on state aid.
Under the agreement, El Al had to obtain approval from the Ministry of Finance for expenditure such as hiring workers and expanding its aircraft fleet. The airline wishes to procure new planes but has been prevented from doing so by its financial position. El Al’s fleet has shrunk from 48 planes before the Covid-19 pandemic to 40 today. The renewed demand for air travel has created a shortage of available planes. Sources at El Al say that the airline could fill 60 planes if it had them.
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Early repayment of the loans will also remove restrictions on management pay at El Al. Some El Al senior managers have been waiting for a pay rise, and will now not have to wait another two years. The restriction on dividend distributions until 2028 will, however, remain in force.
El Al’s planned $62 million offering will be postponed to April 2023. It was also decided that the state will bring forward payments on account of El Al’s security expenses, amounting to $20 million, to December 2022. El Al will repay the amount by April.
El Al CEO Dina Ben-Tal Ganancia said, “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 the light of rising demand, El Al has agreed with the Ministry of Finance on acceleration of the process of repaying the bond held by the state amounting to $45 million, two years before the scheduled date. I am confident that the move will lead to improvement in El Al’s ability to grow and to deal with a competitive and changing market.”
Published by Globes, Israel business news – en.globes.co.il – on September 11, 2022.
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