Kenny Rozenberg: I mend broken companies

• Author: Michal Raz-Chaimovitz
• Published date: 22 October 2021
• Publication title: Globes (Rishon LeZion, Israel)

One year later, the Covid crisis is still with us and Israel's airlines are far from recovery. In September 2021, 144,500 passengers flew El Al, a quarter of the usual number for the holiday month. To make matters worse, the $100 million compensation that the airline hoped to receive from the Ministry of Finance has yet to materialize.

To cope with all this, El Al is set to embark on a massive streamlining plan in which it will sell 16 of its 45 aircraft, layoff 1,500 employees (after already shedding 1,900 employees) and halt the operations of its Sun D'Or subsidiary, which operates flights on Shabbat. This week El Al also reported that it is in merger talks with Arkia.

"I don't regret it for one second," Rozenberg asserted in his first-ever interview since acquiring control of El Al. "Although I would prefer that it happened without the negative publicity and without the slurs but El Al will become a profitable business."

When Rozenberg mentions the slurs he is referring to the pressures against the person who actually bought control in El Al - his son Eli Rozenberg - a young yeshiva student who had immigrated to Israel several years previously. This was because the state, which has a golden share in El Al, insists that the airline's controlling shareholder is an Israeli citizen while Kenny Rozenberg was at the time only a US citizen, although he has since immigrated to Israel and taken Israeli citizenship.

Eli Rozenberg's attempt to buy control of El Al was not greeted kindly by all those involved. Mozes-Borovitz described Eli Rozenberg as a "straw man, without means and without business experience." She claimed that the buyer was really a foreign citizen and that the government should disqualify him. Requests to halt the transfer of control were sent to the Government Companies Authority, Ministry of Transport and Ministry of Defense.

Rozenberg said, "Eli is my son. He is a mature boy and what happens in the family stays in the family. We are a team and we have other joint businesses. The entire family was involved in the deal.

"They warned me that I didn't know what I was getting myself into by buying El Al. I thought, what else can they already say about me? I am transparent and I don't hide anything. What you see is what I am. But I discovered that there was actually a lot that they could say and much of it was completely wrong. I have a lot of employees and so it's fine if they'll say things about me from time to time but here this was enormously powerful."

Rozenberg's aim was to buy control of El Al outside of a public offering. But the negotiations with Knafaim did not lead anywhere due to the claims that Rozenberg was not an Israeli citizen. He said, "That ploy was not acceptable to us and the negotiations were broken off before they began." Rozenberg was represented by businessman Amikam Ben-Zvi, who is today El Al chairman, and Brig. Gen (res.) Reem Aminoach. Eventually, Rozenberg took control of El Al by investing $105 million in the public offering.

Were it not for the public offering would you have invested less?

"Let's say that it was challenging but I took on the challenge. I didn't know what it would lead to."

The state, or in effect the public, also profited from the offering. In order to encourage El Al to raise capital at the time, among other things in order to repay the debt to all the passengers whose flights had been canceled due to Covid, the Ministry of Finance committed to buy shares for $75 million (half the shares on offer). But due to Rozenberg's appearance on the scene, the state cut its investment by more than half to $33 million. The state currently holds a 13% stake in El Al, Knafaim holds 9%, Rozenberg 40% and the remainder is held by the public. Rozenberg's investment has grown to $160 million, and is due to grow further to $200 million.

"A broken company that can be mended

Rozenberg (55) was interviewed in his home in Jerusalem - an impressive and spacious house. Rozenberg is married with five children and five grandchildren. He opens the door to us with a welcoming smile and invites us up to the meeting room on the second floor. The grandchildren's toys are strewn across the floor and there are as yet unpacked crates.

We hold a further meeting with Rozenberg two weeks later in El Al's VIP lobby at Ben Gurion airport, just before he takes off for the US. The other passengers don't recognize that this is El Al's owner. El Al's employees do recognize him and he is offered a glass of wine or something to eat every so often. "I'm not drinking I'm boarding the plane," he told them with a smile.

He admitted that his experiences with El Al in the past were, "not positive." I was a Matmid Frequent Flyer with gold status and I decided to give it up. They called me to ask why and asked was I not bothered about all the points I'd accumulated. I said no. The representative who spoke to me said: but we are the only company who serves soup in first class. That was a comment that so much lacked understanding...