The Israeli national carrier El Al has agreed to borrow $130million to help it recover from difficulties it faced over Covid. The loan is the latest in a series of financial measures taken by the airline after reporting substantial losses in 2020.
Conditions of the loan
Today, El Al signed a non-binding loan agreement with the Phoenix Group, a UK-based insurance service. The loan will be subject to 5.5% to 7% interest, though the airline says the final details are yet to be decided. The money will help them recoup the $110million of losses reported in the last quarter of 2021.
The loan is part of a government bailout package, which El Al benefitted from last year. The airline was given $210million in state aid, but in return, they had to agree to take specific measures that would aid their financial recovery. These included laying off one-third of their workforce and selling a portion of their fleet.
They were also told they would have to either sell a stake in their frequent flyers club, Matmid or use it as collateral to secure an additional loan. El Al has opted for the latter, and Phoenix will have the option to buy 25% of Matmid by the end of 2027.
The two companies have 90 days to agree on a final deal, during which time El Al is prohibited from taking out any further loans.
El Al’s Financial difficulties
Israel’s conservative coronavirus restrictions seriously hurt sales for their flag-carrier airline. The state has employed stringent border policies since the very start of the pandemic, only recently reopening its borders to unvaccinated travellers. El Al reported a $140million loss for the end of 2020, but thanks to borders reopening and financial aid from the government, it managed to reduce this figure to $110 by the end of 2021. Hopefully, with the help of this new loan, we will see the Israeli carrier continue to make a recovery from a difficult two years.
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