El Al’s board has finally agreed to accept the government’s bailout terms.
The headlines all say the airline will be nationalized are misleading.
A $250MM loan will be backed by a 75% state guarantee and $150MM of stock will be sold.
If the stock is sold privately, then the government wouldn’t take control of the airline, but if the public doesn’t buy the stock then the state will buy it. That would lead to the state taking over control of the airline once again, a business the state began exiting in 2003.
The deal still has to be signed off by labor unions, but that appears likely as they feel they will do better under new ownership. Labor was against another government offer for a bigger loan that wouldn’t lead to the state taking over the airline.
If the government does have to take control of the airline, they say that they hope to sell off the airline within 3 years after stabilizing the airline.
El Al has systemic problems and they were losing money before COVID-19. They have failed to adapt and compete in an open skies world. The lack of vision from management has been stunning. I’d guess that’s because the airline is run as a good ole boys club with top management roles gifted to IDF pilots.
Their customer service has a reputation for being surly and anti-consumer. That has only been reinforced by refusing to offer refunds for flights from March-June. Why would anyone spend more money with an airline that holds their money hostage? The airline appears to have cancelled all flights until September.
El Al’s Matmid program is the laughingstock of the entire airline industry.
El Al has spent millions making their site less functional while stripping out features.
While El Al has long claimed to be Israel’s lifeline carrier, that role actually fell to United during COVID-19 as El Al suspended service.
I’ve spent hours talking with company executives off the record, though the only advice that was ever implemented was reaching out to Alaska Airlines about mileage reciprocity, which never fully got off the ground. Those interviews were supposed to have been reviewed and redacted to allow for publication, though that never happened. They’re too scared for a frank conversation to be viewed by the public.
Is the airline in its current form worth saving?
I’ve written about how they have stealthily blocked award space from partners, let the sick and volunteers fend for themselves, devalued award charts and flight earning, went dynamic, revamped an awful website to make it even less useful than ever, removing award data from public search engines, closed lounges, circumvented Shabbos restrictions, closed airlines within an airline, wet leased planes, broke strollers, broke up with HAS without warning, introduced plastic first class seats a generation behind business class seats, claimed alliances are anti-semitic, diverted passengers to Goose Bay and then Athens or nonstop to Athens for Shabbos and saying they deserved it, cancelled settlements for slandering passengers and religious Jews over a non-existent NDA.
That’s a lot of excess baggage!
In 2002 Switzerland allowed flag carrier Swissair to go bankrupt, after keeping it alive for half a year on government support.
A regional airline took over the valuable assets such as the planes, landing rights, and crew under new contracts to create Swiss International Air Lines. The airline was later sold to Lufthansa Group, but maintained its Swiss flag and has been a success story.
The same thing can be done with El Al. Because when there’s a dumpster fire, adding more oxygen to it isn’t going to put out the fire. A new airline with new ideas and management from abroad with actual aviation experience could create a world class carrier that is profitable and an airline that Israel can be proud of. I just don’t see that happening without starting from scratch.
It wouldn’t be without precedent in Israel.
The Israel Broadcasting Authority was bloated with too many employees, high salary costs, and regulations that strangled it. Rather than try to fix it, IBA was shut down and KAN was launched in its place the next day.
I love Israel and want nothing more than to see El Al succeed and become a world class carrier and the pride of Israel.
But let’s be real, public radio isn’t an airline and the Israeli government won’t allow El Al to fail. Make no mistake, El Al will be back at the bailout table again, because the issues it faces are too ingrained to be fixed.
Leave a Reply
39 Comments On "Will El Al Will Be Nationalized Again Or Should It Be Allowed To Fail And Start With A Clean Slate?"
All opinions expressed below are user generated and the opinions aren’t provided, reviewed or endorsed by any advertiser or DansDeals.
Dan,
As a result of your advise, I complained to the DOT, and received a refund for my two April round trip tickets.
The refund came a month ago.
TODAY, I received the following email from El AL:
Thank you for contacting El Al via U.S. Department of Transportation.
We are sorry to learn of the inconvenience that you and Mrs. L. were caused due to the changes that were made to the operation of our El Al flights as a result of the Coronavirus crisis.
We would like to update you that although our offices are still temporary closed, and work is made on an emergency basis only, your tickets in bookings LPJNU5 were refunded to the credit card used. It is possible that the actual refund may be posted in the next few days.
Our renewed apologies for any inconvenience caused.
Sincerely,
Customer Relations
EL-AL ISRAEL AIRLINES LTD
I would remove PNR
Israel will always need to have a “flag” airline for its national security interest… and that of Jews the world over. They’re effectively backstopping this deal. Like an investment banker that guarantees to buy stock in a public offering. So nationalized or not, the State of Israel is saving El Al. And will always do so, even if it means truly nationalizing it.
I’m not suggesting that Israel shouldn’t have a flag carrier, read the post again.
So good: “That’s a lot of excess baggage!”
Interesting that you supported US taxpayer bailout of US airlines, presumably to save your frequent flier miles, but not bailout of El Al.
1. The US bailed out healthy profitable airlines. El Al was not healthy or profitable before COVID-19, so what exactly is going to change?
2. I did not support the US bailout as it was done. I supported using the bailout, if it was going to happen anyway, to extract consumer friendly concessions:
https://www.dansdeals.com/more/dans-commentary/bail-airlines-hotels-boeing-ask-return/
The real question is if the Israeli government takes over El Al will it become less anti-Semetic (or at least anti-Orthodox) or more anti-Semetic?
I Vote Dan CEO of EL Al Chadash!
I vote Gordon Bethune 🙂
Continental is still around?:)
United
Dan are you saying Israel wont let it fail meaning they will do whatever it takes to keep current EL AL management? But if state takes airline over does that not start new ownership?
The issues aren’t limited to just ownership/management.
care to elaborate more on that
are you saying israeli gov would rather keep existing structure/management no matter what rather than start from the bottom up?
New ownership doesn’t mean new management
If they go bankrupt. What will happen to all my Matmid points?
Moot point, the government won’t allow them to go bankrupt.
In the US when airlines have entered chapter 11 to shed costs, miles have always been saved.
I was hoping for a poll , so I could vote for it fail, but hey this DD we all feel the same basically so it would be pointless! Good read as always Dan
Should I still assume that my son’s 8/26 ticket is cancelled?
Yes!
Nothing about AeroMexico airline’s bankrupcy?
Don’t have much to add. LATAM had more AA/DL drama and Avianca has miles that people value.
What does all this mean in terms of resuming service? Will they be flying more regularly now? Can we assume their September flights back to normal?
Doesn’t mean anything.
Elal has $23000 for my Pesach family trip that never happened. Tragic systemic root poor management plagued the airline. Clean house from the top to save what should be a crown jewel of the country we all love…and need.
Did you dispute with the credit card and file DOT complaint?
FILE A DOT COMPLAINT AND GET YOUR MONEY BACK!!!
@dan under new management are you still bound to keep your interview/advice to them private?
What are your thoughts on a frum group of investors putting up 150mm? If they take control, keep shabbos, respect their clients, run it with an American attitude, etc (and every other one of your suggestions), any chance it will be profitable for them?
That sounds like a great idea. Baruch Hashem the frum community has a number of people that could do that and it would create the possibility for a real kiddush Hashem of an airline. How can we make this happen?
Every one of their flights all FULL, why are the not making a profit?
Anyone can fill a flight. Filling it profitably is the challenge.
It’s certainly a possibility. Negotiating with labor will be the big challenge.
Great article! Just wanted to point out that “laughing stock” should be one word.
“A new airline with new ideas and management from abroad with actual aviation experience”
Sorry Dan – we don’t need experts from abroad, just someone with some saichel. Heck my grandchildren would do a better job!
@Dan
I would make another point (which doesn’t contradict anything you wrote), While I am not certain this is true, purportedly Israel has a strategic airlift agreement with ElAl in wartime. Israel currently doesn’t have any emergency airlift capacity (other than a dozen or so 707/kc135 tanker transport and a handful of c130’s – a much smaller aircraft).
Strategic airlift is expensive c17’s/C5’s or airbus MRTT and A400m cost a lot to own and maintain, copies of these aircraft can run over 200m a copy. Unlike many other countries, since Israel’s military is primarily a defense force, these capabilities aren”t required in peacetime. But, having the emergency capacity in wartime is utterly necessary in any medium term conflict.
While commercial passenger aircraft do not offer the same capabilities of military cargo jet (being unable to carry vehicles helos, tanks and artillery), they do provide a much greater total payload and range and can be used for supplies, ammunition and other parts.
If this is true, Israel would need to carefully vet foreign buyers and/or investors as well as carefully manage the leadership structure of the company. During wartime they cannot afford some foreign countries courts grounding the aircraft for a variety of reasons, nor can they allow high level management to lack top level security clearances.
The price to pay for a failed airline, is a few hundred million every couple of years in loans. A relatively cheap way of owning such an emergency capacity.
If this is true it would explain much of your points and sadly leave us with no choice but United/Delta – maybe that isn’t so bad 🙂
I have filed a dot complaint and received email from chase that Elal notified them that it will take 10 weeks to respond !!!! disgrace!! they owe me over 4k!! I have followed up with dot and they have yet to respond to me!!
El al is so gross and reprehensible it actually takes my breathe away! I literally got off the phone with an agent a week before they closed shop and she promised me my refund in full within thirty days! Fast forward three months I haven’t seen a penny PLUS they had the nerve to claim to CHASE they “supplied the service”!!! Can you fing believe it!!? How do we get these mothwrflippers to get their act together??? As consumers how can we make our collective voice heard and get rid of their toxic and disgusting service !??
I’d assume most of us would NEVER want to fly them again, but what can be done acutely to slap em the hell up!??
Seething