The agreement, which the cabinet approved without the adjustments El Al demanded, may cause FIMI to pull its agreement to invest $75 million in the airline.
Israel's airlines today began a strike against the open skies agreement with the EU that the cabinet approved, claiming that it is a death blow. For El Al Israel Airlines Ltd. (TASE: ELAL), which faces a challenging financial situation, the agreement could have far-reaching consequences: its financing agreement with First Israel Mezzanine Investors Fund (FIMI) includes a clause relating to open skies.
The agreement, which the cabinet approved without the adjustments El Al demanded, may cause FIMI to pull its agreement to invest $75 million in the airline in several installments.
For El Al, key paragraphs in the open skies agreement relate to its security costs. Under the agreement, its 30% share of these costs will drop to 20%. El Al's security costs totaled $33.3 million in 2012, effectively constituting an extra tax it pays the government. El Al also wants the government to secure it more slots at key European airports, similar to the slots that the government is about to approve for foreign airlines at Ben Gurion Airport.
Published by Globes [online], Israel business news - www.globes-online.com - on April 21, 2013
© Copyright of Globes Publisher Itonut (1983) Ltd. 2013
Sapir Peretz, Adrian Filut, and Globes' correspondent