El Al Israel Airlines Ltd. (TASE: ELAL) has signed an agreement with the Ministry of Finance on security costs. El Al CEO Eliezer Shkedy told "Globes" that El Al signed the agreement earlier this week in which the government, which last year covered 60% of the carrier's security costs, will pay 65% this year, 70% in 2012, 75% when the open skies free competition agreement is signed with the European Union, and a maximum of 80% when the open skies agreement is implemented.
Shkedy said, "This is a good and fair agreement that will enable fair competition against foreign carriers that do not have these overheads."
El Al's current security costs are about NIS 120 million annually, so the agreement will reduce these overheads by NIS 6 million in 2011 alone.
Shkedy was talking to "Globes" after yesterday's publication of the carrier's second quarter results, which saw El Al post a loss of $19.5 million.
He blamed the loss on higher jet fuel prices, the contaminated fuel affair, which closed Ben Gurion airport over a weekend in May, and a crack in one of El Al's Boeing 777 jets, which grounded the aircraft for a month.
He said, "These last two events caused a significant increase in costs and lower revenue as a result of the changed scheduled we were forced to implement."
Regarding the contaminated fuel affair, El Al is the subject of a NIS 12 million class action suit brought by passengers affected by the delays and cancellations. The carrier is eagerly awaiting the official report from the Knesset committee set up to investigate the matter to see who was to blame for the contaminated fuel.
Published by Globes, Israel business news - www.globes-online.com - on August 18, 2011
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