A surprising business move is set to yield El Al Airlines a one-time profit of approximately 192 million shekels, all thanks to an old option signed about seven years ago.
El Al Airlines announced that it will exercise a “phantom” option granted to it under the partnership agreement with the frequent flyer club Flycard in 2018. This economic right, included as part of the agreement with Cal, allows El Al to enjoy a particularly handsome profit following the sale of Cal to the Harel Insurance Group and the Horash Group.
The Profit: Following Cal’s Sale Deal
The deal between Cal and the new buyers was signed at a valuation of approximately 3.75 billion shekels, with the potential to increase the valuation to 4 billion shekels depending on the company’s performance. As a result, El Al will receive a guaranteed profit of about 172 million shekels, and if the optimistic scenario materializes, the amount will increase by an additional 20 million shekels, reaching 192 million shekels.
What is El Al’s Phantom Option?
Under the agreement signed in December 2018, Cal granted El Al a “phantom” option that provides economic rights amounting to 8.75% in the event of a company sale exceeding 1.8 billion shekels. The deal was closed on behalf of El Al at that time by Attorney Lior Tanner, one of the founders of the Flycard club and its first CEO.
Now, with the sale being conducted at more than double the threshold set in the option, El Al is reaping the rewards.
Unexpected Profit
It was hard to imagine at the time of signing the agreement that El Al would see profits of such magnitude. Even at Cal, it seems, they did not anticipate that the company would be sold at such a high valuation, making the historic agreement a remarkable financial move for the airline.
Impressive Profit Line Unrelated to Aviation Activities
The move illustrates how smart financial strategies—even if not directly related to aviation activities—can significantly contribute to the cash flow and profit line of an airline like El Al. Today, the Rosenberg family, which holds control of El Al, is reaping the benefits of an agreement signed during the ownership of the Knafaim Group.
