EL AL Pilots Demand 25% Stake In Airline

Filed Under: El Al

As reported by Haaretz, EL AL pilots are arguing that if they’re expected to make the biggest concessions in light of the current pandemic, they should also have the most upside during good times.

EL AL is trying to cut costs

Like so many airlines around the world, EL AL is in a rough financial situation. All EL AL passenger flights are suspended through at least June 20, 2020.

Beyond that, the airline needs to reach a new collective bargaining agreement with employees as a condition that was promised to the Finance Ministry in exchange for government guarantees on a $400 million bank loan.

In order to achieve $400 million in annual cost savings, the airline has promised to cut 2,000 of 6,500 positions. The cuts go way beyond that, as the employees who do stay at the airline will take pay cuts, including top executives, board members, and pilots.

EL AL will be laying off nearly one third of employees

The issue that EL AL pilots have

EL AL pilots were initially represented by the EL AL Workers Council, but the pilots split off and started negotiating separately when they felt that their interests weren’t being represented.

With the current proposal to cut costs, roughly 20% of wage savings would come from the company’s 550 pilots. In other words ~8.5% of employees would make 20% of the concessions.

On the surface that doesn’t seem that far off, when you consider that pilots are paid significantly more than most other frontline employees.

The pilots are arguing that if they have to disproportionately provide concessions during these tough times, they should also be able to share more in future profits, and the pilots want an option giving them a 25% stake in the company. That’s a pretty big ask — we’re not talking about a couple of percent, but rather a full quarter of the company.

This talk of concessions isn’t just creating problems between pilots and management, but also between pilots and the rest of EL AL employees. Part of the frustration comes from the fact that most employees are on unpaid leave, while 280 Boeing 787 pilots have returned to work and are operating cargo flights, so they haven’t suffered nearly as much as other employees.

There are also negotiations about taking away or restricting travel benefits of pilots and their families, but that’s not something the pilots are okay with, as they point out this is a standard industry benefit.

EL AL wants pilots to make concessions with travel benefits

Bottom line

EL AL is in a dire financial situation, and the Israeli government hasn’t exactly been proactive with offering aid. The airline needs concessions from employees in order to get a government guarantee on a loan, and that’s complicated.

I’m curious to see what kind of an agreement pilots and management come to, as a 25% stake in the airline might be pushing it…

(Tip of the hat to Micah)

Comments
  1. “they should also have the most upside during good times.”
    They already have. It’s called a bonus.

    This is what happens when you try to put this equation
    pilots + unions+ ownership (management) = big mess.

    It’s funny when people think you get the upside during good times by owning the company.
    I owned a fraction of Amazon and never got any upside ever. The only thing is the stock value appreciation. The difference here is I can sell that ownership anytime but I highly doubt the 25% pilots own can be sold in the market easily. Otherwise it will be (big mess)^2 given the structure in the future.

    El Al will never fail. Mossads always need a covert transportation.
    They can easily save money by reducing their extreme security and maybe get some IDF budget.

  2. @Eskimo: isn’t security paid for by the state already? I know that El Al have also refused to operate to countries which have denied them the right to have their own security as well

  3. The value of each employee can be expressed by their replaceability. And the airline industry is going to have quite a surplus of workforce for the years to come. It’s quite an easy question – if pilots are unwilling to go down from 10-15k EUR/month to let’s say 7-10k, then they are free to look for another use on the labour market. Of course, provided they find some company that is willing to put a price mark of 10-15k a month on their skill. No one? Well… Then perhaps it would be wiser to shut up and go from absurdly overpaid to just overpaid. That’s the virtue of the free market and it’s called demand and supply. Asking for 25% of shares for not getting what their were used to in the past is a bad joke. Times have changed, get used to it.

  4. How likely is it that El Al eventually goes broke and is replaced with a merged Arkia-Israir to replace them?

    The challenge EL AL’s faced for years pre Covid 19 have been competition from low cost European carriers like Easyjet and Wizz Air offering cheap flights into different parts of Europe, larger carriers like British Airways and United offering 1 stop flights across the Atlantic through their hubs while Asian carriers like Air India, Korean Air and Cathay Pacific were offering 1 stop flights through their respective hubs to Asia and Australia/NZ. Not long after Cathay first started their flights to TLV in 2018 before the protests in HK they had been making a banging on that new route mainly from Australia/NZ passengers wanting a 1 way option to Israel.

  5. To Martin,
    Why do you think the pilots are “absurdly overpaid”.
    Do you realise the money,sweat and tears pilots go through to get there.
    Well,i do.
    Flying in the beginning is not that glamorous and well paid.
    They deserve every penny.

  6. @Edi,

    In this case, it’s probably true- do a search and Haaretz reports that some El Al pilots earned up to 160,000 shekels/month, which is equivalent to over $45K… Obviously the pilot union is strong in Israel. El Al resorted to doing some wet leases, but got a lot of push back from passengers complaining that they were paying El Al prices, but not getting El Al flights.

    But Martin is wrong about easily replaceable by 7-10K Euro staff. Most El Al pilots are ex-military, so have strong solidarity, and the Israeli government isn’t going to look favorably at a full on union busting exercise.

    So I’d assume they will come to some compromise, and the pilot union will receive a smaller ownership stake than requested, but more than others are getting. And good for them.

  7. No union, negotiating in a down market doesn’t seem to be a good strategy. My guess is there will be thousands of pilots looking for work so the airline may be able to replace at lower than offered.

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