As expected, EL AL has failed to create the basis for a much-needed money injection. Negotiations with a potential investor were cancelled last week.
First Israel Mezzanine Investors Fund (FIMI) cancelled its planned $75 million investment in the airline after its management failed to reach an collective labour contract with employees of all the airline’s sectors.
This agreement was a condition for the deal.
FIMI announced its intention to invest in EL AL in January, and the parties signed a conditional agreement in April.
The investment was planned in several phases, with the main condition that EL AL reach an agreement to lay off some 900 employees.
However, negotiations failed and the necessary agreement was not signed. The investor will not inject the money – but it will also not bring into EL AL the needed change in its business environment.
With FIMI holding a big chunk of the airline’s shares that change would have been natural. But this did not happen.
Shortly before FIMI pulled out, EL AL announced the purchase of six Boeing 737-900ER passenger aircraft.
The first will be delivered this month, the second in early December and the other four by early 2016. EL AL will operate the aircraft on its European routes.
The types will include 156 economy-class seats and 16 in business class.
Without a new main shareholder EL AL will have to adapt quicker to the competition set to begin next year, when the open skies agreement with the EU is fully implemented.
Sources say EL AL is currently trying to find another investor.
It’s hard to imagine that such a party will make a move with EL AL not shrinking to save money.