State Guarantee Approved for Continuity of Airline Companies

In order to ensure the continuity of airline operations, the Finance Committee, led by MK Moshe Gafni, approved today a state guarantee for Inbal Insurance Company Ltd. for providing war risk insurance to Israeli airlines and for war insurance for Russia-Ukraine. The policy will be issued as long as the insurance policy held by the airlines is cancelled or reduced.

As previously reported, the Finance Committee approved in October a state guarantee of up to $6 billion for Inbal Insurance Company Ltd. for providing war risk insurance to Israeli airlines, in light of the outbreak of the Iron Dome war in Gaza and rocket fire towards the center of the country. This was when the insurance companies insuring El Al, Arkia, and Israir announced that, according to the terms of the insurance policies signed by the airlines, the insurance companies are entitled to cancel the insurance policies. Prior to this, the committee approved in March 2022 a state guarantee of up to $2 billion through Inbal, for a state guarantee for Israeli airlines for operating air routes on the Israel-Russia line, against the backdrop of the Russia-Ukraine war.

Now, against the backdrop of Operation 'With All Your Might', a request was submitted to the Finance Committee to update the state guarantee. The request stated that 'the Israeli airspace is closed to international flights except for exceptional flights that have been pre-approved for security and insurance reasons', and that 'the Airports Authority approved a plan for evacuation flights for Israeli companies only at this stage with a restriction to specific flights while considering providing a comprehensive response to evacuation and bringing goods to Israel'.

The request also stated that as a result of the operation and the security situation, and according to the terms of the insurance policies signed by the airlines, 'the insurance companies insuring the airlines in insurance plans for war risks for aircraft body damage and liabilities (body damage), announced the cancellation of the aforementioned war risk insurance', and that the Israeli government, 'wants to maintain functional continuity in the economy and therefore it is necessary to maintain the functional ability of the airlines for the purpose of transporting goods, and performing evacuation flights by airlines coming to Israel and more'.

Against this backdrop, the Accountant General asked the Finance Committee to amend the uses for the guarantee limit set in the Finance Committee's discussions on the Russia-Ukraine war and the Iron Dome war so far, so that these guarantee amounts will be merged into one guarantee, which will also include the needs of the campaign against Iran. This guarantee will allow the provision of a guarantee in accordance with the law, in a total amount of up to $8 billion, 'for the purpose of war risk insurance for Israeli and foreign airlines in order to maintain economic and functional continuity of evacuation and passenger flights to Israel, bringing necessary cargo and also for providing a guarantee for flights to Russia and Ukraine'.

The policy will be issued in practice as long as the insurance policy held by the airlines is cancelled or reduced for war risks in certain areas, after the approval of the Accountant General, the policy will be for a period of up to three months, with the possibility of shortening or renewing the insurance period for additional periods subject to approval.

At the end of the discussion, the committee approved the merger of the existing guarantees for Inbal Company to cover its obligations and costs regarding the policies it will issue for providing war risk insurance to airlines in a total amount of $8 billion, for a period of two years from the date of the committee's approval.

The representative of the Accountant General, Michal Shashinsky, emphasized that the merger of the guarantee has 3 uses: 'Flights to Russia Ukraine, flights of Israeli airlines and also guarantees for foreign companies and shipping companies if needed, there is a need for continuity in the economy, import, export, that we can give confidence also to these companies'. The process also includes passenger flights and also shipping flights for the foreign companies.