El Al has returned three wet-leased aircraft and canceled the lease of two more as it scrambles to save cash. The Israeli airline shared a statement on June 30th in which it shared a host of proactive measures to secure equity. With reduced cash flow and lack of government funding, it has warned of dire consequences.

El Al grounded

El Al cuts its fleet

Times have certainly been better for the airline industry, and for carriers like Israel's national airline, there is a real cause for concern. On June 30th, the airline posted financial results for the first quarter of 2020, in which it shared massive losses. For the first three months of the year, ending on March 31st, El Al lost 25% of its revenue compared to the same period in 2019. In addition, it accrued a $140m deficit compared to the first quarter last year.

It's apparent that El Al is in a difficult situation. However, it's recognized its need to generate additional equity to see it through the coronavirus.

One such initiative has been to reduce its fleet. In a press release about its financial results, the airline said it has "taken a series of streamlining measures and steps designed to improve its cash flow." These include the return of three wet-leased aircraft and the cancelation of lease agreements on two Boeing 737-800s due to enter service this year.

El Al Aircraft on tarmac
Streamlining the fleet is one way that El Al can gain strength for future operations. Photo: Getty Images

El Al sells assets to combat the fiscal deficit

The extent and impact of COVID-19 have caused El Al to get creative with its cash flow generation. While it's cut back on its fleet, the carrier has sold a few of its assets and shares to improve its financial standing.

In May, the airline sold its 25% stake in Maman Cargo Terminals and Handling, generating $15.4m. On top of that, it sold nine engines to the tune of $11.5m. Furthermore, it has put an end to costly investments until it's in a better position.

However, despite these small wins, El Al has warned that its future still looks bleak if it cannot secure vital government funding to save it from bankruptcy.

El Al at gate
Without funding, the airline's operations could see further delays. Photo: Getty Images

Could El Al face bankruptcy?

In the press release, the airline issued a stark warning about the security of its future. El Al said,

"Since there is uncertainty as to the completion of obtaining the assistance...[at] this stage, there are considerable doubts regarding the continued existence of the Company as an ongoing concern, and accordingly, the financial statements include an ongoing concern disclosure."

El Al grounded
Bennett flew to Moscow on Saturday in an effort to mediate between Russia and Ukraine. Photo: Getty Images

The airline is still hashing out the details of a reduced government bailout. El Al had expected to receive some $400m from its government but instead was presented with $150m. It insists that it is still in talks with the Ministry of Finance, although the longer it waits, the more it might need to secure.

All flights with El Al have now been postponed until July 31st, and 92% of the airline's workforce is not receiving a salary. While many of the world's airlines are gearing up to restart operations, El Al is behind the starting block.

Do you think El Al is facing bankruptcy? Let us know your thoughts in the comments.