Home News Israel $210 million government aid to Israeli airlines

$210 million government aid to Israeli airlines

The government plans to pre-purchase agreements with airlines to increase revenue.

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An Israeli El Al airline aircraft is seen on the tarmac at Israel's Ben Gurion Airport in Lod, east of Tel Aviv, on July 7, 2020. - Israeli airline El Al said on July 6 it had agreed to a government bailout that could pave the way for the carrier's renationalisation, after losses linked to the novel coronavirus pandemic. The plan also reportedly involves a stock offering, with the government agreeing to absorb any stock left unsold from that offering. (Photo by JACK GUEZ / AFP) (Photo by JACK GUEZ/AFP via Getty Images)

Tel-Aviv: Israeli airlines will receive a lifeline from the government to deal with the coronavirus crisis. The government plans to pre-purchase agreements with airlines to increase revenue. El Al is the first to receive this lifeline and saw the government buy $ 210 million advance tickets.

According to Reuters, Israel has announced a new rescue package for the country’s struggling airlines. The package was long-awaited, as the country did not provide direct financial assistance during the crisis, but only offered loans by the government. This time, the government is offering lifebuoys, but with a catch.

Pre-purchasing tickets will save airlines for Israeli aviation security personnel who have to travel to different airports. This means that the government will buy hundreds of thousands of tickets in advance, increasing the airline’s air reserves and using the tickets over the next two decades for security personnel who have to travel.

El Al is the first recipient of this scheme, which replaces the proposed $ 300 million loan from the state. The government bought $ 210 million worth of seats from El Al and Sun Dor subsidiary to be used by security officials for more than 20 years. Other airlines that have security personnel will receive similar offers in the coming weeks.

This is not a new idea, with Hong Kong buying 500,000 tickets from the city’s airlines last year to promote airlines and later offering the tickets through a lucky draw. These tickets cost the government $ 260 million and were at a critical time for flag bearer Cathay Pacific and others.

The Emirati, Israeli and US flags are picture attached to an air-plane of Israel’s El Al, adorned with the word “peace” in Arabic, English and Hebrew, upon it’s arrival at the Abu Dhabi airport in the first-ever commercial flight from Israel to the UAE, on August 31, 2020. – A US-Israeli delegation including White House advisor Jared Kushner took off on a historic first direct commercial flight from Tel Aviv to Abu Dhabi to mark the normalisation of ties between the Jewish state and the UAE. (Photo by KARIM SAHIB / AFP) (Photo by KARIM SAHIB/AFP via Getty Images)

While many major aviation markets provided direct incentives through rescue plans, Israel did not. Instead, the government has taken a more fiscally conservative approach to ensure it recovers its funding. This meant that the flag bearer got El Al and other loans with a government guarantee but provided cash but contributed the debt heap.

However, ticket purchases are a tasty middle-ground for airlines, which now offer benefits. While carriers may lose future revenue from blocked seats for the government, the need for survival outweighs it. Since the border with Israel has been largely closed for a year, the rescue operation will be critical for airlines.

The rescue plan is crucial for airlines, but it is on the verge of recovery. Israel has rushed forward to vaccinate its population and provide both doses to nearly 50% of the population. Once a critical mass of the population has been reached, the country will once again be fully open to tourism, first domestically and later internationally.

Countries around the world will look to Israel as the first example of a country that is normal. If business were to fall soon, the government could even reopen its border and allow vaccinated tourists to return. For now, airlines are hoping the rescue company is enough to ensure they work through aviation recovery.

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