Commodities

Israel's El Al extends flight suspension, gets union approval for bailout

Credit: REUTERS/RONEN ZVULUN

El Al Israel Airlines on Thursday extended its suspension of flights to the end of August and said it reached cost-cutting agreements with the country's main labour union that will facilitate a government bailout.

JERUSALEM, July 16 (Reuters) - El Al Israel Airlines ELAL.TA on Thursday extended its suspension of flights to the end of August and said it reached cost-cutting agreements with the country's main labour union that will facilitate a government bailout.

The Israeli flag carrier, which sent nearly all of its 6,500 employees on unpaid leave since the coronavirus outbreak, has said it will go bankrupt without state assistance.

The government has offered to guarantee bank loans and even buy a majority stake, but it is demanding an overhaul, including some $400 million in cutbacks. The airline's workforce is expected to be reduced by about 2,000 employees.

El Al said it signed an agreement with the umbrella Histadrut labour federation regarding the airline's 650 pilots, who have been the last holdouts. Flight attendants, mechanics and administrative staff have already signed on.

Histadrut said the pilot agreement alone would bring $105 million in spending cuts. The pilot's association, however, did not support the deal, saying it was a manoeuvre to secure government assistance and that a final arrangement needs to be reached.

Chief Executive Gonen Usishkin said the company has now met the "basic conditions" to receive the bailout. "The plan includes parting ways with many people, salary reductions and giving up benefits," Usishkin said in a letter to employees.

The mandatory furlough was also extended to the end of August, and should commercial flights resume then, workers will be gradually brought back, he said.

The airline's board has agreed to a government offer to back $250 million in bank loans on condition that El Al issues $150 million in shares. The state said it would buy the shares, giving it a majority ownership, if no one else did.

(Reporting by Ari Rabinovitch; Editing by Steven Scheer and Andrew Cawthorne)

((ari.rabinovitch@thomsonreuters.com; +972-2-632-2202; Reuters Messaging: ari.rabinovitch@thomsonreuters.com@reuters.net))

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