Israel's Ministry of Finance has agreed in principle an assistance package for Israel's airlines. The state will extend a balloon loan over two years while the controlling shareholders will commit to inject more capital into their companies.
The ratio between the amount injected by the state and by the owners has yet to be decided. The Ministry of Finance estimates that El Al Israel Airlines Ltd. (TASE: ELAL) will need a loan of $150-200 million and Arkia Israeli Airlines Ltd., and Israir Airlines Ltd. will need $20 million each.
A source in the Ministry of Finance said, "The airlines have taken a big hit in the third quarter, which is supposed to be the most profitable quarter for the companies. We sat with all the companies to understand their cash flow situation and we're forming a plan on the basis of this. The aim is to see, on the assumption that Covid will be staying with us on the current format that the companies can survive in cash flow terms in the near future and streamlining will also be subject to this."
The Ministry of Finance has not defined what it means by streamlining at the three airlines. El Al has already laid off 1,900 employees - one third of its workforce before the Covid pandemic.
The state will grant the loans through convertible bonds with balloon maturity after two years without a fund or interest in order to provide the airline, "peace of mind over the coming period. The companies don't have to repay for two years and after two years they can convert the loans with shares at the price of an offering to public with a discount for the state."
The state is restricting purchase at up to 24.9% of each company in order not to nationalize any of the three companies. The Ministry of Finance stressed, "The state will buy shares only if there is an offer to the public. We leave the decision to the discretion of the companies."
Published by Globes, Israel business news - en.globes.co.il - on August 24, 2021
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