(Bloomberg) -- Israel is considering options for El Al Airlines Ltd. that include a bankruptcy filing as the coronavirus outbreak wipes out demand for travel, according to people with knowledge of the situation.
Officials are also examining the scope for mergers involving El Al and Israel’s two other main airlines, Israir Airlines and Arkia Israeli Airlines Ltd., according to one person, who asked not to be named as the deliberations are private.
While radical steps are under consideration, discussions center on government-backed loans that would come in return for an efficiency plan including job losses and salary reductions, another person said, adding that the aid could total $500 million. El Al, which was struggling for profitability even before the pandemic, has already announced job workforce cuts and furloughs.
Spokespeople for El Al and the Israeli government declined to comment.
The airline, which has 7.1 billion shekels ($2 billion) in debt, according to data compiled by Bloomberg, is among hundreds worldwide whose future is in doubt as the virus spreads. Carriers could lose $252 billion in revenue this year, according to the International Air Transport Association, which says bailouts of $200 billion may be needed to save the industry.
Bezalel Smotrich, Israel’s transport minister, said Tuesday in local media a loan was the most likely option for El Al. At the same time he said Israel may not need three airlines and raised the possibility of a “dissolution” of El Al and a freeze in proceedings with the state keeping its jets to create a new airline.
The Finance Ministry’s chief economist, Shira Greenberg, told Bloomberg on March 12 that El Al needed to propose a sound business plan before the government would put in money.
El Al has been closely tied to the development of Israel after being founded alongside the country itself in 1948, and was state-owned until being privatized in 2004.
According to the latest annual report the government owns 1.1% of El Al and a “golden share” that protects national interests such as maintaining it as an Israeli company and ensuring a minimum flight capacity, including for emergency or security purposes.
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