Israeli Parliament Passes Bill to Save El Al from $400 Million Lawsuit

El Al Israel was hit hard by the current aviation crisis, putting the airline in deep financial trouble, the Airline faces a class action lawsuit from customers at the Central District Court over its inability  to refund customers whose flights have been canceled due to pandemic-related restrictions, the airline announced in a statement released to Tel Aviv Stock Exchange on 12 July. Israel’s flag carrier airline owes its customers a total of approximately $400 million.

It is alleged that the company has not compensated its customers for canceled flights within the time limit set by the law. According to the lawsuit application, Israel’s national airline also failed to inform its customers that they must submit a written request to the airline  to be reimbursed.

It was further stated in the application that the airline violated the provisions of the Aviation Services Law regarding compensation and assistance regarding flight cancellations or changes.

“The airline has not compensated the customers whose flights were cancelled as of February 1 and has not notified them that they need to submit a written request for the refund,” allege the complainants. The applicants claimed for restitution amounting to $400 million as well as interest.

Israeli Parliament Passes an Amendment to Back the Battered Airline

A bill adding a temporary provision to the Israeli Aviation Services Law was previously read at the Knesset, the national legislature of Israel. However, the bill was subject to approval of parliament members.

In accordance with the proposed bill, airlines will have to compensate the customers for the canceled flights within 90 days due to the drastic changes in the global aviation industry in light of the coronavirus epidemic.

“The completion of the enactment of the temporary bill is subject to approval in the second and third readings at the Knesset. It should be noted that there is no certainty that the legislative process will be completed in the manner described above,” said the airline in the statement on 12 June.

The Israeli Parliament’s amendment to the law extending the time from 21 days to 90 days has been approved by the members of the Israeli parliament on 13 June. The news comes a day after the airline reported the lawsuit to the stock exchange.

Under the provisional law, airlines will be able to offer its customers a credit instead of refunding their money in the event of cancellation.

The temporary order will apply to all canceled flights that were scheduled to depart as of March 1. The bill will also covers the flights before March 1 on condition that the flights were canceled due to coronavirus isolation obligations.

The temporary order will be effective until August 31 and relevant ministries will be able to extend it up to nine months in total.

“In the current situation, where airlines have been severely affected by the coronavirus crisis due to a huge drop in demand, as opposed to high fixed expenses that the ability to reduce them is very limited. Continuation of this situation poses a real danger to the continued existence of Israeli airlines as viable companies,” read the justification of the provisional law.

“In the circumstances created, ways need to be found to reduce the damage to airlines due to the severe crisis in the industry, and the proposed law amendment is one of them.”

The Israel Consumer Council previously filed class action lawsuits against United Airlines, Ukraine International Airlines, Aegean Airlines, Vueling Airlines, Transavia and TAP Air Portugal due to unpaid refunds.

“The law states that when a flight is canceled at the initiative of the airline then the customer is entitled to get their money back or an alternative ticket according to their choice, and the airline is obligated to inform passengers regarding the option of getting their money back. Since the flight cancellations began, these companies have harmed their customers and have ridiculed the law,” said Israel Consumer Council CEO Ofer Merom.

Earlier this month, El Al Israel Airlines canceled all flights including passenger and cargo services indefinitely. El Al lost $140 million in the first quarter of 2020 and airline revenue dropped 25% to $321 million due to the ongoing pandemic.

Last week, the airline’s board accepted a government bailout amounting up to $400 million. Under the agreement, Israeli government will receive %61 of shares of the company, meaning nationalization of the airline that was privatized in 2004.

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