Will El Al Will Be Nationalized Again Or Should It Be Allowed To Fail And Start With A Clean Slate?

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El Al’s board has finally agreed to accept the government’s bailout terms.

The headlines all say the airline will be nationalized are misleading.

A $250MM loan will be backed by a 75% state guarantee and $150MM of stock will be sold.

If the stock is sold privately, then the government wouldn’t take control of the airline, but if the public doesn’t buy the stock then the state will buy it. That would lead to the state taking over control of the airline once again, a business the state began exiting in 2003.

The deal still has to be signed off by labor unions, but that appears likely as they feel they will do better under new ownership. Labor was against another government offer for a bigger loan that wouldn’t lead to the state taking over the airline.

If the government does have to take control of the airline, they say that they hope to sell off the airline within 3 years after stabilizing the airline.

El Al has systemic problems and they were losing money before COVID-19. They have failed to adapt and compete in an open skies world. The lack of vision from management has been stunning. I’d guess that’s because the airline is run as a good ole boys club with top management roles gifted to IDF pilots.

Their customer service has a reputation for being surly and anti-consumer. That has only been reinforced by refusing to offer refunds for flights from March-June. Why would anyone spend more money with an airline that holds their money hostage? The airline appears to have cancelled all flights until September.

El Al’s Matmid program is the laughingstock of the entire airline industry.

El Al has spent millions making their site less functional while stripping out features.

While El Al has long claimed to be Israel’s lifeline carrier, that role actually fell to United during COVID-19 as El Al suspended service.

I’ve spent hours talking with company executives off the record, though the only advice that was ever implemented was reaching out to Alaska Airlines about mileage reciprocity, which never fully got off the ground. Those interviews were supposed to have been reviewed and redacted to allow for publication, though that never happened. They’re too scared for a frank conversation to be viewed by the public.

Is the airline in its current form worth saving?

I’ve written about how they have stealthily blocked award space from partners, let the sick and volunteers fend for themselves, devalued award charts and flight earning, went dynamic, revamped an awful website to make it even less useful than ever, removing award data from public search engines, closed lounges, circumvented Shabbos restrictions, closed airlines within an airline, wet leased planes, broke strollers, broke up with HAS without warning, introduced plastic first class seats a generation behind business class seats, claimed alliances are anti-semitic, diverted passengers to Goose Bay and then Athens or nonstop to Athens for Shabbos and saying they deserved it, cancelled settlements for slandering passengers and religious Jews over a non-existent NDA.

That’s a lot of excess baggage!

In 2002 Switzerland allowed flag carrier Swissair to go bankrupt, after keeping it alive for half a year on government support.

A regional airline took over the valuable assets such as the planes, landing rights, and crew under new contracts to create Swiss International Air Lines. The airline was later sold to Lufthansa Group, but maintained its Swiss flag and has been a success story.

The same thing can be done with El Al. Because when there’s a dumpster fire, adding more oxygen to it isn’t going to put out the fire. A new airline with new ideas and management from abroad with actual aviation experience could create a world class carrier that is profitable and an airline that Israel can be proud of. I just don’t see that happening without starting from scratch.

It wouldn’t be without precedent in Israel.

The Israel Broadcasting Authority was bloated with too many employees, high salary costs, and regulations that strangled it. Rather than try to fix it, IBA was shut down and KAN was launched in its place the next day.

I love Israel and want nothing more than to see El Al succeed and become a world class carrier and the pride of Israel.

But let’s be real, public radio isn’t an airline and the Israeli government won’t allow El Al to fail. Make no mistake, El Al will be back at the bailout table again, because the issues it faces are too ingrained to be fixed.