Who does El Al belong to

Ultra-Orthodox is redefining the course at El Al

Israel's national airline is battered. The entry of a new investor is a mystery.

At El Al, as with all airlines, things look bleak. The corona crisis forced the famous Israeli airline to cease operations for months. Before that, she'd been losing money for years. It is considered a ramshackle company with a debt of around $ 2 billion.

Nevertheless, a young man named Eli Rozenberg decided to take over the company. Rozenberg, largely unknown in Israel and not yet 30 years old, recently owns almost 43% of it. He has no management experience and no aviation skills. So far he has apparently primarily occupied himself with the study of the Torah.

It is no wonder that the El-Al management is resisting the takeover. The young investor was a front man of his 54-year-old father Kenny Rozenberg, protested the bosses of El Al. He pushes the offspring because he does not have an Israeli passport himself and is therefore out of the question as the owner of the national carrier. Eli, however, who has lived in Jerusalem for several years and became an Israeli citizen, is the main shareholder “kosher”.

The $ 105 million it took to buy the 43% stake actually came from Eli's father, a New York State real estate agent. The entrepreneur runs a health center that includes retirement homes and rehabilitation institutes with around 50 branches. His net worth is estimated to be at least $ 0.5 billion.

Long list of mistakes

Before Eli was entered in the share register, he had to undertake not to appoint his father or his shop stewards to management. This at least formally dispelled the suspicion that the young company boss would implement his father's instructions in the future.

Probably the world's most inexperienced airline owner now has to put El Al on a healthy footing in a difficult environment. The previous management does not, of course, provide him with a suitable template. "Even before the Corona crisis, from 2016 to 2019, El Al's market share had collapsed from 33 percent to 24 percent," says Nissim Malki, former El Al chief financial officer.

In the same period, the low-cost competition spread, which benefited from an open-skies policy that had been in force with the EU since 2012. As a former quasi-monopoly, El Al missed staying competitive in the new competition.

Management made another mistake: When oil prices collapsed in late 2014, it saved nearly $ 450 million in operating costs, says Malki. The quick win was fatal because it led to a false sense of financial security.

“At that time there was almost euphoria,” recalls the ex-CFO. El Al ordered 16 new Boeing aircraft - and that within a very short time. This means that El Al now has one of the most modern fleets with 45 machines. "Because of the rapid rejuvenation, however, the debt rose far beyond the usual pattern of fleet renewal," said Malki.

A third wrong decision concerned the expansion of the route network. According to Malki, some new destinations turned out to be “economically questionable”. According to the former CFO, there was rumor within the company because the management was accused of a lack of economic expertise. Malki: "There were operational disruptions, flight delays and additional costs."

If Israel's airline is to be successful again in the next three to four years, decisions must be made “quickly and correctly” at the top management level, Malki demands. The number of destinations and frequencies must be reconsidered. In addition, contracts with the workforce and with leasing companies are renegotiated in order to save costs. After all, as many customers as possible who could not use purchased tickets worth $ 250 million because of the Corona crisis would have to be put off until later with vouchers.

No desire to save

But nothing there: In Tel Aviv people are already raving about new destinations. "With the opening of the Persian Gulf, some investors see good chances that Israel's economic metropolis could mutate into a regional hub," says lawyer Ori Keidar, who is well connected to the business world. However, this means that El Al, which is small in global comparison, will have to face very strong competition: Turkish Airlines and soon also Emirates.

In view of these challenges, Rozenberg's motives for buying remain a mystery. He has not yet commented on his plans. Perhaps he sees El Al as a national symbol with which he identifies. Perhaps he also senses the chance to use the Corona crisis to put the company on a healthy footing.

Secular observers, however, are wondering whether the ultra-Orthodox believer can lead El Al into profitability. Because if the airline's machines have to stay on the ground on Shabbat as before, the return to breakeven remains an unattainable dream.