El Al Israel Airlines Ltd (level:Ellal) He could not have dreamed of better compensation for the damage caused by the Covid pandemic, which almost led to its collapse, than the consequences of the war, which led to record profits over the past year and boosted the company’s market value to a shekel. 3.4 billion.
The long list of those benefiting from El Al’s turnaround includes the company’s shareholders, chief among them controlling owner Kenny Rosenberg, senior executives and, as it turns out, the company’s pilots as well. A Globes examination found that if the company’s earnings rate is maintained in the second half of 2024, and all indications are that is the case, El Al pilots will receive bonuses totaling NIS 130 million ($35). . million).
This is according to a clause in the collective wage agreement signed in 2018, as no one would have imagined that the airline would earn this much money in one year. At the end of 2023, El Al employed 555 pilots, so each is expected to receive an average bonus of about NIS 250,000 ($67,500).
Under the 2018 agreement, if El Al’s annual pre-tax profits exceed $100 million, the pilots would receive 6% of that year’s profits. El Al has already earned nearly $300 million before taxes in the first half of 2024. Market estimates indicate that the third quarter will be better than the previous two record quarters, the only question is by how much.
Even if El Al gets nothing in the fourth quarter, and assuming the third quarter was as good as the second, the pilots will receive a bonus of NIS 84 million. No wonder El Al has already made provisions for this in its financial statements.
Goals that were recently considered out of reach
Even if El Al’s results had not been nearly as good, the 2018 salary agreement would have earned the pilots a significant amount of money. Under the agreement, if pre-tax profit is $25 million, the pilots receive 2% of the company’s profits. In the event of achieving a profit of up to $50 million, they receive 4% of the profits, and in the event of a profit of up to $100 million, they receive 5%.
It should be noted that the pilots’ bonus is conditional on the company’s decision to distribute bonuses to its management or to any of its employees. But there is no reason to think it won’t, in such a successful period for El Al; It was so successful that it allowed El Al to dream big and attempt a NIS 3.1 billion takeover of the credit card company Isracard — although its bid has since been withdrawn.
Until the outbreak of war, these were unattainable profit goals. In 2023, El Al recorded a pre-tax profit of $125 million, and in 2022 it lost $14.4 million, with huge losses in previous years due to the Covid pandemic.
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Evidence of El Al’s difficulty turning a profit before 2023 can be found in the company’s executive pay policy. The desired goal was an annual profit of $20 million, which would allow CEO Dina Ben-Tal Janansia to receive a special bonus of up to 2% of annual pre-tax profit, up to NIS 3 million, and 90% of that bonus for Chairman Amikam Ben-Zvi. , in addition to bonuses for other senior executives.
Even without the huge bonus of earnings, El Al pilots are well paid. In 2020, El Al revealed in court that its pilots received an average salary of 95,000 shekels per month, and that some of them received monthly salaries of up to 160,000 shekels. The pilots argued that the numbers were exaggerated and that their real salaries were less than half of these amounts. The amended salary agreement with the pilots in 2022 (valid until the end of 2025) stipulated that the cost of the pilots’ annual salary would be NIS 635 million (before additional benefits).
Dividing this amount by the number of El Al pilots supports the salary estimates presented by the company in court. Pilot salaries accounted for more than 42% of the company’s total salary expenses in 2022, even though their percentage of El Al’s workforce does not exceed 11%.
In the 2022 agreement, the 31% reduction in pilot salaries, which they had to absorb during the Covid pandemic, was cancelled, and this has been reflected over the past two years in a jump of about 30% in the company’s total salary expenses. These are very large amounts, because employee compensation is El Al’s largest expense (exceeding fuel spending), totaling $334 million in the first half of 2024, and $567 million in all of 2023.
As part of their salary, El Al pilots enjoy a benefits package that includes, among other things, six free flights, a 90% discount for the pilot and family members on all flights, as well as payments for car and travel expenses, telephones, dental insurance and other perks.
The owner and management also make the most of it big time
Of course, pilot wages pale in comparison to those of Kenny Rosenberg, the American businessman who took a chance — and took a huge risk — when he seized control of the airline in the midst of the Covid pandemic in 2020. Until then, a name unknown to the Israeli public A total of NIS 800 million were invested in the company (in stocks, options and loans). His stocks and options are currently worth about NIS 1.9 billion, so on paper he is NIS 1.1 billion more than he invested.
The rise in value is of course due to the war conditions, which saw the price of Al Al’s shares rise by 170% since last October. Because many foreign airlines stopped flying to Israel, El Al became a monopoly on many routes, especially between Israel and North America, and gained a 46% market share of passengers traveling to and from Ben Gurion Airport. This situation led to a jump in prices and huge profits. On those profits, El Al does not pay taxes to the state, as it is still carrying significant losses from previous years, and the company is not expected to pay tax on its profits in the coming quarters either.
Generous remuneration options for the CEO and Chairman of the Board
El Al executives, led by CEO Dina Ben Tal Janansia and Chairman Amikam Ben Zvi, along with other executives, are among the biggest beneficiaries of the boom in the company’s business. These managers received options with an exercise price of 3.89 shekels per share, while the share price on the market today is more than 8 shekels – more than double.
The value of Ben Talal Janansia’s options benefit is currently about NIS 6.2 million, and Ben Zvi’s is NIS 4.9 million, while 11 other senior executives have options worth NIS 30.2 million and two others have options worth NIS 6.7 million. In total, these options are worth approximately NIS 48 million.
In addition, these executives enjoy one-time bonuses for making profits. The CEO has already benefited in 2023 from a bonus of 2.4 million shekels and the chairman of the board of directors from about 1.8 million shekels. Next year, their bonuses are expected to increase to NIS 3 million and NIS 2.7 million, respectively.
There was no response to this report from El Al.
Published by Globes, Israel Business News – en.globes.co.il – on October 31, 2024.
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