El Al Airlines hit hard in first quarter by coronavirus crisis

TEL AVIV, July 1 (Reuters) - El Al Israel Airlines reported a first quarter loss on a steep drop in revenue and said it has had to give up some of its fleet and release most of its workforce on unpaid leave to contend with the coronavirus outbreak.

Israel’s flag carrier is seeking state-backed loans to help it through the crisis, as foreigners are barred from entering the country and incoming Israelis must enter quarantine.

The government argues that the airline’s problems, including a bloated workforce, high salaries and a weak balance sheet, began well before the pandemic.

El Al said it was still negotiating with the government over an aid package. Two offers are on the table.

The first includes $400 million in bank loans, most of which will be guaranteed by the state, and El Al issuing 150 million shekels ($43 million) in shares. In the second, the loan amount drops to $250 million and the stock issue rises to about $150 million with the government committing to buy whatever shares are not purchased by the public.

In the meantime, El Al has suspended regular commercial flights at least until the end of July. To compensate it has expanded its cargo operations by refitting commercial planes.

The company said it lost $140 million in the first three months versus a $55 million loss a year earlier. Revenue dropped 25% to $321 million.

El Al has been renewing its fleet in recent years to better compete with an influx of foreign low-cost carriers, but that has been halted.

It cancelled lease agreements for two Boeing 737-800 planes and returned another three. The company also reached a sale-and-lease-back agreement with a foreign company for three 737-800s for $76 million.

“The scope of the coronavirus crisis is something we have never seen, and no airline, no matter how strong, can survive without government assistance,” said CEO Gonen Usishkin.

$1 = 3.4613 shekels Reporting by Ari Rabinovitch, editing by Louise Heavens