Time is running out for Israeli airline EL AL. While there is no real progress in the negotiations with the airline’s workers unions, potential investors are showing signs of impatience.
First Israel Mezzanine Investors Fund (FIMI) has given EL AL Israel Airlines extra time to reach an agreement with its employees. This agreement, which according to FIMI must include layoffs for several hundred employees, is the main condition for the fund’s investment in the airline. FIMI gave EL AL 45 days from July 16 until August 29, under the terms of the investment agreement.
In a notice to the Tel Aviv stock exchange EL AL said: “FIMI stated that in view of the slow progress in the talks on a new labor contract between the company and its employees, and because signing this agreement to FIMI’s satisfaction is one of the conditions for closing the investment agreement, FIMI believes that there is little chance that the investment will be made on the date set in the investment agreement. In order to improve the chances of closing the deal, FIMI is extending the agreement.”
FIMI has also stated that despite the extension and the importance that it attaches to EL AL, the chances of reaching the needed agreement are low. Therefore, the fund declared that it is allowing the company, notwithstanding what is stated in the investment agreement, to approach and manage negotiations and even close a deal with another investor which would be prepared to invest.
In April, FIMI and EL AL signed an agreement for the fund to invest $75 million in the airline in exchange for a 48% stake. The agreement is subject to EL AL signing a new labour contract with its employees, among other conditions.
As I have previously written in this column, there is no doubt that EL AL can reduce its workforce by almost 1,000 of its nearly 6,000 employees.
The extension will be used for another attempt to reach agreement with the airline’s employees. To judge by past experience, the chances are small but the extra time will be used to its fullest.