State (of Israel) to sell 49% of El Al on TASE in May

Globes ^ | 4 February 2003 | Dror Marom

[anotherview]

State to sell 49% of El Al on TASE in May

The state will retain a golden share in the airline, enabling it to commandeer aircraft in an emergency.

Dror Marom 4 Feb 03 17:05

Government Companies Authority director Eyal Gabbai told ''Globes'' today that the flotation of El Al Israel Airlines shares would take place in Tel Aviv this May. The flotation will take place on the basis of the airline's 2002 financial statements. Initially, 49% of the company will be sold, with the rest being sold later.

Gabbai revealed that the state would retain a golden share in the airline giving it voting rights but not entitling it to receive dividends.

The golden share that will remain in the state's hands will enable it to continue to commandeer El Al's aircraft for national needs, such as an airlift to bring Jews to Israel, or to transport military supplies in emergencies. The golden share will prevent El Al's management from selling cargo planes if this will bring the airline's cargo capacity below a minimum set by the government and the army.

Up to now, the privatization of Israel's national carrier has been blocked by the objections of haredi (ultra-orthodox) political parties to allowing it to fly on Saturdays. The recent elections in Israel have weakened the power of these parties.

Another obstacle has been the demand of El Al employees for the repayment of $140 million contributed to the company in the 1980s from their severance pay fund, among other things to finance the purchase of new aircraft. El Al employees will apparently be offered 10-15% of the shares in the airline at preferential terms.

Approaches to underwriters when privatization of El Al was mooted in the mid-1990s produced company value estimates of only around $150 million. Gabbai commented that "the question whether this is the right time for such a move is irrelevant. The right question is why has it not been done up till now? El Al is not worth $1 billion, and the difference between floating it when the stock exchange is looking good and when it's looking less good is not substantial."

El Al is expected to report a loss of under $30 million for 2002. The reduction in its losses is due, among other things, to a streamlining program, the dismissal of hundreds of employees, and cut-backs in representative offices overseas.

Published by Globes [online] - www.globes.co.il - on February 4, 2003

[yonif]

I would like the national carrier to remain under government control.

However, this might be necessary.

The golden share that will remain in the state's hands will enable it to continue to commandeer El Al's aircraft for national needs, such as an airlift to bring Jews to Israel, or to transport military supplies in emergencies.

I hope that remains...