Board of Israel's El Al agrees government bailout

FILE PHOTO: Employees of Israeli flag carrier El Al Airlines take part in a protest asking for recovery plan for the cash-strapped airline that has been grounded due to the coronavirus disease (COVID-19) outbreak, near the Finance ministry in Jerusalem May 10, 2020. REUTERS/Ronen Zvulun/File Photo

JERUSALEM (Reuters) - The board of Israel's El Al Airlines ELAL.TA has agreed to a bailout package that will likely put the flag carrier back under state ownership, the company said on Monday.

El Al and controlling shareholder Knafaim Holdings KNFM.TA have been in bailout talks with the Finance Ministry since the coronavirus crisis pushed the airline to the verge of bankruptcy.

The ministry offered to back $250 million in bank loans but said El Al must issue $150 million in shares. The state said it would buy the shares, giving it a majority ownership, if no one else did.

The flag carrier said in a statement the board had agreed to the offer, though unions must still sign off on required cost-cutting measures. Parliamentary approval is also required.

In addition, company shareholders must vote on increasing the registered shareholders’ capital.

El Al, which has reported losses for two years running and racked up debt to renew its fleet, suspended flights when Israel closed its borders and furloughed most of its 6,500 employees. It has said it faces bankruptcy without state help.

The Finance Ministry has said that should the state, which privatised El Al less than two decades ago, retake a majority, it would give control to an independent trustee to handle daily operations and would seek to sell the shares in the future.

Reporting by Ari Rabinovitch and Tova Cohen; Editing by Jan Harvey