Many question marks hover over the deal aimed at changing the way Israeli airline EL AL is managed.
This change has been needed for some time, but the current shareholders couldn’t even start the process.
Now there is a chance that this change will happen – but the celebration will have to wait.
First Israel Mezzanine Investors Fund (FIMI) and El Al Israel Airlines signed an agreement under which FIMI will invest up to $75 million for a 47% stake in the airline, and form a control group in it with Knafaim Holdings.
According to the proposed deal, FIMI will invest $50 million in El Al at the closing for a 38% stake.
FIMI will also receive two options, each totalling $12.5 million, which will give it a 47% stake in the airline when exercised.
The deal will close in July 2013. FIMI may extend the closing by two periods of 45 days each.
FIMI will fulfil its commitment to the deal if some conditions are met: approval by El Al’s general shareholders meeting, obtaining regulatory permits and, above all, working out a new collective agreement with its employees on terms that FIMI deems satisfactory – at its sole discretion.
There is a consensus in the industry that EL AL can shrink its workforce by almost a thousand of its nearly six thousand employees – but this will not be easy because of the workers unions.
Without conquering this obstacle the investment is still up in the air.
However, redundant employees are only the most visible problem – there are others, and they will also have to be solved if the new shareholders hope to see some return.
The main problem is the operation of the airline on only five and a half days of the week – a strange situation resulting from historic pressure of the religious parties in Israel.