LONDON – El Al, Israel’s flag carrier, is set to repay the state aid it received during the height of the pandemic earlier than expected.
The Ministry of Finance and the carrier El Al have agreed to the repayment of the loan by December this year.
Originally the carrier was set to repay it by the beginning of 2025. The state aid to be repaid amounts to a total of $45 million.
With the loan, an agreement came in place. This resulted in El Al having to get approval from the Ministry of Finance for expenditures like buying new Jets and hiring new staff.
During the pandemic, the carrier reduced its fleet from 48 to 40 aircraft. As of now, the carrier is looking to invest in new planes.
According to sources at El Al, the carrier sees a surge in demand that could fill 60 planes – if they had them. So far, the airline has been prevented from doing so due to its financial position.
As demand is rising again, the airline recently announced the launch of flights from Tel Aviv to Tokyo, Dublin, and Melbourne. All of the above routes were announced in 2019 but were canceled due to the pandemic.
Even though the carrier repays the loan early, the restrictions on dividend distributions will remain until 2028.
The airline’s senior management will also be able to receive a pay rise, which some managers have been waiting for.
The airline’s planned $62 million offering has been postponed until April 2023. It has also been announced that the Ministry of finance will be bringing forward payments accounting for El Al’s security expenses, amounting to $20 million, which will be paid in December 2022.
The amount will be repaid by April 2023.
El Al’s CEO Dina Ben-Tal Ganancia said: “Out of a desire to consolidate the company’s growth and the improvement in its results, and in order to create management flexibility, among other things through investment in the company’s working capital, and also in the light of rising demand, El Al has agreed with the Ministry of Finance on the acceleration of the process of repaying the bond held by the state amounting to $45 million, two years before the scheduled date.”
“I am confident that the move will lead to improvement in El Al’s ability to grow and to deal with a competitive and changing market.”
El Al has recently announced profitability, as the carrier returned to full operations in Q2 2022 after the removal of all Covid-related restrictions.
Revenue in the second quarter has been up 132% compared to the second quarter in 2021, generating a revenue of $516 million.
The airline had a gross profit of $66.3 million in Q2 2022, compared to a gross loss of $19.7 million in Q2 2021. This was due to the far higher revenue.
It’s good to see El Al back in profitability and with big plans for the future.