The Israeli airline ElAl has been in serious trouble as a result of the Corona crisis. Employees have been fired or sent on leave without pay. Customers are being kept in the dark as to restitutions for unused tickets. Planes are being sold or refurbished for Cargo duty. The company has been pressuring the government to step in and “save” the airline. Several proposals back and forth have been aired, from nationalization of the airline and firing a significant part of the employees and cutting the salaries of the remaining ones, to government secured loans. Also, an American investor has expressed interest in buying the ailing airline.
Airlines the world over have suffered severe problems since the onset of the Corona virus crisis, with air travel practically disappearing and with no real end in sight. Governments have been supporting the airlines, which are considered national assets, especially in Europe, but strict conditions have been attached to this assistance that in some cases reaches billions of dollars in aid. The conditions include the rehiring of a significant number of the fired employees, reduction in salaries for top executives and not only them, as well as ecological improvements with respect to pollution and noise hinder.
With ElAl, the conditions attached to an agreement concern mostly financial issues as well as personnel reductions but those are sufficient to cause unrest under the employees and questions regarding the airline and the way it will look after the Corona crisis.
However, when looking at the airline before the crisis started, it appears that the bail-out would have been necessary also without the Corona virus disaster.
From the Financial results of 2019, it may be seen that the Airline increased its revenues as well as the number of passengers flown while operating expenses were reduced, mainly as a result of lower fuel prices. However, the company reported a net loss of approx. US$ 60 million, which is even more than the losses of 2018.
When looking at customer reviews of the company (from Skytrax), a rating of 5 (out of 10) is obtained, with no category scoring higher than three stars (out of five). On-time performance of the airline was dismal and does not improve over time, with ElAl being ranked among the worst performers.
One of the main reasons for ElAl’s worrisome performance before the Corona crisis has been the personnel costs, with ElAl pilots being among the highest paid and most demanding in the industry. Without being able to analyze the work conditions of ElAl’s pilot for lack of information, with a current fleet of approx. 40 planes, 600 pilots appears to be a very high number and maybe it is time to look at the work conditions and the compensation of pilots at ElAl. (It must be said that the numbers at the big American airlines, such United Airlines, also have approx. 15 pilots per plane).
Would ElAl have collapsed also without the Corona crisis? It is hard to say, but it is very clear that management and owners are now exploiting the situation that has developed, to put their house in order with the help of the Israeli government. Some will say that the company is a strategic asset to the country and in times of unrest or war, an Israeli airline will be the only one willing to fly over here, and everything must be done to save it and put it on its feet.
If that is indeed so, then nationalization is the right thing to do because the government will obtain control over the airline and will be able to direct it where required in emergencies. The question is of course how much would such control cost and is Israel willing to pay.
The advantage of a privately owned commercial airline are manifold:
- A commercial airline is managed according to business need and not (sometimes dubious) national needs. This however, with ElAl has led to continuous losses.
- The management will be able to control costs according to the needs of the airline, in particular personnel cost. With ElAl, the unions control personnel cost and management mostly will have to follow suit or face labor action.
- A commercial airline will utilize its resources at the maximum and most optimal level. With ElAl, both before and after privatization, 15% of the time, planes are on the ground (sometimes at exorbitant cost at foreign airfields), as flying on the Sabbath is inconceivable. (Of course the Sabbath is a major cause for the continued losses of the company, but it doesn’t appear there is much to do about this at this point).
It seems as though nationalization will be the ideal solution for ElAl, but is it for the State as well? The cost of such an endeavor cannot be estimated. Salary costs will spiral out of control the moment the global situation will return to normal. The Sabbath grounding will be continued (it is a Jewish Airline after all) and the company will most likely become a tool in the hands of politicians who will use it for their personal gain (as is done with most public assets in Israel).
However, being the ultimate National Jewish symbol, the “people” will be willing to take all the disadvantages in their stride and prefer an ElAl that is Jewish over an ElAl that is commercially viable.
