El Al’s Chairman Steps Down

The chairman of El Al Israel Airlines is resigning. On Sunday, Eli Defes, who has held the chairman’s role since 2017, said his tenure at the airline was ending with immediate effect. He attributed the decision to an undisclosed medical issue.

El Al chairman, Eli Defes , has resigned with immediate effect. Photo: El Al Israel Airlines

El Al chairman cites medicinal reasons as he quits with immediate effect

According to Reuters, early contenders to take over the chairman’s role include Yehuda Levy or Tamar Mozes-Borovitz. Both hold vice-chair roles at the airline.

“I have full confidence in the company’s management and board members who will know how to lead El Al to beyond this crisis to a more stable and secure future,” Mr Defes said in his resignation letter.

In addition to chairing the board at El Al Israel Airlines, Mr Defes, 66, sits on the boards of four other companies, including Clalit Biomedical Engineering, Shila Clalit Smile, Mor Research, and Harel Insurance Co. Ltd. Mr Defes has sat on the El Al Israel Airlines board since 2015.

El Al has suspended all flying since March as it fights for survival. Photo: El Al Israel Airlines

His resignation comes at a critical juncture for the airline. In March, Mr Defes said El Al was in dire financial straits. At the time, the airline was seeking a loan and a government guarantee. He told Globes, an Israeli business website, that with ongoing expenses and no revenue, El Al Israel Airlines faced bankruptcy.

“A company with expenses and no revenue will go through its cash and face bankruptcy and liquidation. We’ve cut down expenses, put 5,500 people on unpaid leave, we’re delaying payments to the Israel Airports Authority, but we’ll reach the limit at some stage,” Mr Defes said.

Other than cargo and occasional passenger flights, El Al Israel Airlines has not operated any flights since March.

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A complex rescue package in place for El Al

Since the chairman spoke to Globes, it took until July for a bailout agreement to get reached with the Israeli Government. The deal was for US$400 million. That would include $250 million in loan guarantees from the government. A further $150 million would get raised from selling shares, with the Israeli Government promising to make up any shortfall. There is an end of August deadline to sell the shares.

The response thus far from potential private investors has been cautious. Eli Rozenberg is a U.S. citizen resident in Israel. He has said he would invest $75 million in return for a 45% stake in and control of El Al.

Mr Rozenberg comes from a prominent New York-based family that owns and operates nursing homes and other health-related businesses.

Two potential private investors are circling El Al. Photo: El Al Israel Airlines

Over the weekend, another potential investor has stepped up. Meir Gurvitz, a US-based real estate businessman, has filed for a permit to allow him to buy between 25% and 40% of El Al’s shares. The Jerusalem Post reports that unlike Mr Rozenberg, Mr Gurvitz is not seeking control of the airline.

A US investment bank Jefferies is marketing the $150 million share sale in the United States. While potential buyers like Messers Rozenberg and Gurvitz are circling, these transactions remain unfinalized. The Israeli Government will buy any unsold shares once the August deadline expires, potentially taking its holding in El Al to 61%.
But if the Israeli Government ends up owning more than 45% of the airline, there is a legal requirement it must offer to buy out the remaining shareholders.
It is a real mess, and one Eli Defes may feel he can live without. His resignation at El Al Israel Airlines takes effect immediately. It is not known if Mr Defes intends resigning from his positions on other boards.