The Likud election victory in Israel will have profound implications for both El Al's future and plans for Palestine's fledgling air transport sector.
Somewhat surprisingly, El Al changed course in its search for capital before the general election at the end of May. The new policy aims to sell up to 49 per cent of the carrier's equity to private investors, instead of floating the shares on the Tel Aviv and New York stock exchanges. Under the new rules, drawn up by the country's Transportation Authority and approved by the El Al board, Israeli interests must make up two-thirds of any investor group, while the foreign partner must already be 'in the airline business'. The Transportation Authority will issue a tender to interested parties in July.
The planned stock market flotation was abandoned after two private valuations put El Al's asset value at $150 million - $550 million short of El Al's estimate. This led to the resignation of the carrier's president Raphael Harlev in March, still to be replaced.
The Transportation Ministry refutes suggestions that the change in government will affect the new plan to sell part of El Al. 'I doubt there will be any change of policy. This is an economic issue unrelated to party politics.'
But financial analyst, Zeev Holtzman, disagrees, suggesting the new government will never lift El Al's ban to fly on the Sabbath - one issue that had worried potential investors when the former Labour government proposed a partial privatisation of the carrier. 'El Al was a difficult investment before the election. Now no one will buy it. The new government is half religious and religious Knessnet members will never permit the new owners to fly El Al on the Sabbath. Who is going to buy an airline that will lose 15 per cent of its potential income?'
Uncertainty also reigns over plans by the Palestinian Authority to set up its own air transport infrastructure. Two weeks before the election, the Israeli government gave the go-ahead for the construction of an airport in Gaza and the operation of a Palestinian airline. The final agreement gives Israel control over security at the airport.
Analysts are split on whether Likud will accept the potential security nightmare of Palestinian planes overflying Israeli territory. It is expected that prime minister Binyamin Netanyahu will not be as forgiving of any Palestinian abrogations of its treaties with Israel as was the previous government. He is expected to block the plans for an airport or airline unless the Palestinians live up to the letter of the agreements. That would mean bringing all terror groups to heel and extraditing suspects to Israel.
Yet Netanyahu has warm relationships with Jordan's royal family and the bilateral transport agreements signed in February should weather any diplomatic rows.
Barry Chamish
Source: Airline Business
