Very detailed article in Haaretz about the family controlling LY.
'How Tami Mozes Borovitz brought El Al down before the coronavirus'
(Haaretz) -- Officially, Tamar Mozes Borovitz is a vice chairperson of El Al, but those who know the airline from the inside say she plays a major role in managing the company, more often than not behind the scenes – and that hasn’t always been for the good of the company. Insiders say Israel’s flagship carrier was ailing even before the coronavirus pandemic brought it to its knees, and assign much of the blame to her.
“She’s a warm and motherly woman, a businesswoman who doesn’t hesitate to show her emotions,” says a veteran El Al employee, who like others cited in this story declined to be identified. “But that said, because of a series of erroneous decisions she was partner to, she’s responsible for what’s now happening to the company.”
Some former and current employees claim that, among other things, she failed to ensure good labor relations, approved huge salaries for senior executives and pilots, managed routes poorly and made undue concessions to ultra-Orthodox passengers. Those close to her reject the criticism. They note that Mozes Borovitz’s job is unpaid and she doesn’t have a company car, although she is entitled to one. They say she takes a personal interest in employees, particularly when they are ill.
The pandemic has hit El Al hard. About 5,800 of its 6,500 employees have been placed on unpaid leave and nearly all flights have been canceled, leaving the airline owning some 1 billion shekels ($288 million) to people who had bought tickets before the global crisis set in. After weeks of wrangling over an aid package, the government unveiled a plan last week for $250 million in loan guarantees. It requires El Al to make a $150 million rights offering, which is how Mozes Borovitz may lose control of the airline. If she and El Al’s other shareholders don’t buy into the offering, the state will purchase the stock, becoming the controlling shareholder.
People who spoke to her this week say Mozes Borovitz doesn’t believe the government will take control in the end. “It’s far from a done deal,” said one. On Thursday, El Al’s board rejected the government’s proposal and put forth its own.
Problems pile up
Mozes Borovitz, 60, is a kind of Israeli princess. The fourth daughter of Noah Mozes, the late publisher of the Yedioth Ahronoth daily, she is the younger sister of Judy Shalom Nir-Mozes and Yedioth’s current publisher, Arnon (Noni) Mozes. From an early age she hobnobbed with Israel’s business and political elite and worked at the newspaper.
Still, her life was filled with tragedy. Her older brother Gilad died at the age of 9, hit by a bus. Her father died in the same manner, hit by a bus in front of the Yedioth Ahronoth building in 1985.
She was only 23 when she married businessman Oded (Dedi) Borovitz, who was 40 and divorced, with three children. She continued working at Yedioth, running the group’s local weeklies. That changed when her mother, Paula, died in 1994, setting off an inheritance battle. Arnon entrenched his control and Mozes Borovitz sold her shares for a reported $60 million.
Mozes Borovitz teamed up with her family’s archrival Ofer Nimrodi to start the magazine Rating. She sold her stake in 2005 but retains other media holdings that include producing telenovelas with Yair Dori of Dori Media and digital advertising. Her husband and brother-in-law acquired other businesses, most notably the Granite Hacarmel holding group, Arkia Airlines and the Clubmarket supermarket chain. They later sold Granite and Arkia, while Clubmarket collapsed. They were left with El Al, which they bought after it was privatized in 2004.
“For years she was her father Noah’s ‘daddy’s girl’ – he was a dominant figure for her,” says a capital markets executive who is very familiar with the inside workings of the company. “She married her husband when she was very young, and in a sense she was in his shadow. Six years ago, when Dedi developed a medical problem, it was the first time that she looked to her right, her left, up – and there was no one.”
That was during El Al’s hardest years, when the blows began to rain down: Open Skies, the reform that opened air travel to more competition; the big pilots’ strike and, worst of all, the coronavirus crisis. “She had been involved in management, but hadn’t had to make such tough decisions on her own,” he says.
A friend defends Mozes Borovitz’s record, noting that El AL isn’t a one-woman show. “El Al has a board with serious people. She’s involved in strategic issues, by dint of being a vice chairman. ... She’s not involved in executive appointments, except CEO, as part of the headhunting team that works with the recommendations of a placement company,” the friend says.
But the bottom line is that when the pandemic struck, El Al wasn’t strong enough to cope. Mozes Borovitz couldn’t change the corporate culture. Pilots and flight crews landing in New York still stay at an expensive Manhattan hotel, even though the airport is in Queens. Passengers with personal ties to management or with whom management wants to curry favor are upgraded to business class when boarding. Employees’ families receive discounts. “The company has an upgrade system,” says one employee.
An associate of Mozes Borovitz says she isn’t involved in such matters. “It doesn’t work that way at El Al,” he says. “If there are upgrades, it happens automatically, the computer decides based on points and previous purchases. There’s nothing personal about it.”
Slow to change
Even as the 2013 Open Skies reform slashed El Al’s share of Ben-Gurion International Airport passenger traffic from half to only 25%, the airline didn’t undertake sweeping changes to cut costs or become more competitive.
El Al is the only major airline in the world that doesn’t fly one day a week (Shabbat), in order not to offend observant Jewsh passengers. But it began flying long-haul routes where it has no competitive advantage, such as Tel Aviv-San Francisco, launched in 2018. El Al ended its flights to Sao Paulo, which were not profitable, after about two years. Late last year El Al announced plans for flights to Melbourne and Sydney, but the pandemic postponed them.
To Mozes Borovitz’s credit El Al has upgraded its fleet, buying 16 Boeing 787 Dreamliners last year. The airline’s fleet of 45 planes is in a far better state now than when the Borovitz family bought it. Another accomplishment is El Al’s Fly Card credit card, although it’s fairly marginal to its core business.
“Tami is a disappointment in business terms,” says another capital markets source who is knowledgeable about El Al. “She didn’t really deal with the collective bargaining agreements, didn’t try to streamline the company, which earned profits only because fuel prices were low. Although she began a necessary program to buy new planes, the company reached a low level of shareholder equity because over the years no one addressed its basic problems.”
Says another source: “The problem with Tami is that she’s always torn between the micro and the macro. She’ll put her all into purchasing planes for a billion shekels and at the same time personally handle requests from people who want some favor. The impression you get is of micromanaging, with a lot of emotion, without order, poor decision-making and poor marketing. In general, the company lacks a long-term strategic vision.”
Many sources pointed to El Al’s inflated salaries as a fundamental problem. For example, from 2005-12, its first seven years as a privatized company, El Al paid a total of 125 million shekels (around $36 million) to its five highest-paid executives. In late 2012, the Shaldor consulting company estimated the excess benefits of El Al pilots, compared to pilots at foreign airlines, at $35 million to $40 million a year.
A legacy of its being a state-owned company, there are first- and second-generation employees and permanent and temporary workers and melange of benefits.
The labor unions are powerful, especially that of the pilots, and any one of them can shut down the entire operation by calling a strike or slowdown. “It creates a balance of terror vis-à-vis the management,” says a former El Al executive. “The Borovitz family, and later Mozes Borovitz herself, were never able to solve that, even when they gave management their full support.”
One company executive blames Mozes Borovitz. “In the company it’s known that [her] decision-making, especially when it comes to management and appointments, is problematic. The bottom line is that she was unable to bring in a manager to put things in order. What did happen is that salaries increased tremendously. It’s hard to get employee buy-in on change when everyone is talking about the high wages,” he says.
“Over the years, when they did reach understandings with the workers, they preferred to reach a compromise that would blow up five years later. The workers’ committee, for example, opposes individual contracts, so every five years flight attendants are fired and rehired. Pilots’ salaries remain high. On the one hand, it’s impossible to introduce business norms when executives are paid so much and on the other hand, to maintain the DNA of a government corporation. There’s a need for a dramatic measure and a willingness to take risks, but for Mozes Borovitz personally it’s probably too late.”
Many El Al executives have a personal connection to Mozes Borovitz. Chief Financial Officer Dganit Palti is the wife of Nadav Palti, Mozes Borovitz’s partner in Dori Media and considered one of the people closest to her. Nadav Palti is also a director of Knafaim, El Al’s parent company. Nimrod Borovitz, Oded’s son and Tami’s stepson, is VP for strategy. Noa Borovitz, Oded and Tami’s daughter, was appointed in January as an unpaid director of El Al subsidiary Cockpit. Dalit Mozes, the wife of Arnon Mozes, is employed in a relatively minor position as a manager in the Frequent Flyer Club.
Conflicts of interest
Another problematic issue is the involvement of former director Pini Ginsburg. Ginsburg owns the Hillel Tours travel agency and represents Thai Airways in Israel. (The airline doesn’t fly the Tel Aviv-Bangkok route, but has code sharing agreements with El Al). Ginsburg is alleged to have been part of a cartel managing Holocaust memorial trips to Poland for high school students.
A year and a half ago Ginsburg resigned from the board after another criminal investigation, this time on suspicion of using insider information. As a director he used to walk around the company’s headquarters, talking with employees and executives. Many executives disapproved, but sources say Mozes Borovitz allowed Ginsburg to continue even though as a director he wasn’t necessarily permitted.
Many worry about a potential conflict of interest between Ginsburg’s travel agency and his being a major El Al shareholder. He who used to organize annual flights for Haredim to Uman, Ukraine, in which El Al was a contractor. Ginsburg also helps Mozes Borovitz in negotiations with pilots. He has stayed in touch even after leaving the board and was been seen several times visiting the offices of her privately controlled companies in Tel Aviv.
Ginsburg declined to discuss those meetings with TheMarker and denied any conflict of interest. “The issue has been examined a hundred times – there’s no conflict of interest between me and El Al. I’m an active director and I understand the industry, and I can talk to employees. I spoke to many people in El Al when I was a director and they all say that the complaints on this matter are nonsense.”
One of the major crises that Mozes Borovitz was forced to deal with was the battle with the pilots, which escalated in 2017-18 when a slowdown led to flights being canceled. In other instances the pilots simply spent more time in the air, so that flights would take off or arrive late.
“Management exposed their behavior. They waged a battle [against the pilots] and the board supported them,” says one former executive. As part of management’s fight, pilots’ salaries and other embarrassing details were disclosed to the media, creating a media circus that one source blamed on Borovitz Mozes.
“El Al has symbolic value – the Star of David and the Israeli pilot. Half of that was tossed in the trash during the crisis. The media got recordings and salary slips that portrayed the pilots as thieves. The conflict could have been handled differently, without damaging the image of the airline’s most important employees. It’s not that there aren’t problems with the pilots, but they certainly can’t be solved that way. Even after the 2018 agreement, not all the problems were solved,” said the source.
A close friend of Mozes Borovitz rejects the claims. “There was no such thing,” she says regarding leaks to the media. “El Al employees are devoted, and El Al pilots are the best in the world. A significant percentage of employees don’t earn high salaries.”
“Noni didn’t help her over the years, but her family name definitely helped, because enemies or regulators didn’t know precisely what their relationship was,” says a journalist familiar with the story. “In fact, Noni apparently didn’t do anything for her. In any case, since Case 2000 [allegations that Netanyahu tried to strike a deal that would have provided him with positive coverage in the newspaper] the ability of Yedioth Ahronoth to serve as a lever over regulation has declined, I assume that it hurt her, too.”
Mozes Borovitz did not reply to TheMarker’s queries regarding her relationship with her brother Arnon.
