heavy losses Israel
'okays El Al sale'
8 July 2002
The Israeli government has agreed to sell the whole of national
carrier El Al, according to media reports.
The initial plan is to float 49% of El Al on the Tel Aviv Stock
Exchange at the beginning of next year.
The fate of the other 51% is still undecided, the Israeli
Transport Ministry said, but the government has not yet ruled
out a sale to a strategic investor.
Before such a deal can go ahead, however, the government
must decide what to do about El Al's two main handicaps -
its ban on flights on the Sabbath, and its exceptionally heavy
El Al in 2000
3 million passengers
Israel needs to accelerate privatisation because it faces a mounting
budget deficit which has battered the currency and undermined investor
El Al has lost money in recent years, but is starting to clean
up its financial position.
Last year, the airline lost $85m, down from the previous year's
$109m thanks to a cost-cutting programme.
More critical is the carrier's drooping revenue, which has been
hit by the overall decline in traffic since the latest escalation
in Middle East tension.
Paradoxically, El Al reported a rise in passenger numbers at the
end of last year, as nervous fliers learned to appreciate its exceptionally
At times of lower tension, however, El Al's rigorous safety procedures
could act as a deterrent to some passengers and investors.
The government now needs to win over political opposition to the
sale, which could be fierce.
Privatisation has rarely been easy in Israel, which has a strong
tradition of communal ownership.
Dominant telecoms firm Bezeq, for example, has only recently been
given the go-ahead for full privatisation.
El Al employees have already threatened to oppose the privatisation,
and the government may have to retain some form of control over
the firm to placate trade unions.
The government is due to outline its 2003 budget plans this month,
and is relying on external sources of funding to help meet its growing