Knafaim Holdings tightens ties with Global Leasing: New management agreement worth over ₪6 million linked to fleet size

The holding company is renewing its management agreement with its aircraft leasing subsidiary, shifting to a shekel-based payment model tied to fleet growth. Annual management fees will start at approximately ₪4.9 million and can grow up to roughly ₪6.4 million.

Knafaim Holdings has approved the extension of its management agreement with its subsidiary Global Knafaim Leasing for an additional three years. The annual management fees, which will now be paid in shekels instead of dollars, are set at approximately ₪4.9 million and will increase in line with the growth of Global's aircraft fleet, up to a potential ceiling of about ₪6.4 million for 16 aircraft. The move, which is subject to the approval of Global's shareholders, is designed to stabilize Knafaim's revenues and tie them to the subsidiary's success.

Knafaim Holdings, the controlling shareholder of aircraft leasing company Global Knafaim Leasing, reports a material update regarding the engagement between the two companies. Knafaim's board of directors has approved the extension of the management agreement with Global Leasing for an additional three years, effective November 1, 2026, while introducing significant changes to the fee structure. The primary move is a shift to paying management fees in shekels instead of dollars, alongside a mechanism that links the payment amount directly to the number of aircraft in Global's fleet. The entire move is subject to the approval of Global Leasing's general meeting of shareholders.

Growth-based fee model

Under the updated agreement, the annual management fees paid to Knafaim will be based on Global Leasing's scope of operations. As of the reporting date, Global holds a fleet of 4 aircraft, and accordingly, the annual management fees will stand at ₪4.895 million, plus VAT. This serves as the baseline for a tiered mechanism, whereby management fees will be updated quarterly according to the growth in the number of aircraft.

The new model presents clear growth potential for Knafaim's revenues. For instance, if Global's aircraft fleet grows to 8 aircraft, the annual management fees will jump to ₪5.397 million. For 12 aircraft, the consideration will stand at ₪5.897 million, and for a fleet of 16 aircraft, the management fees will reach ₪6.399 million annually. This represents a potential increase of approximately 30% in management fee revenues, creating a full alignment of interests between the holding company and the subsidiary's growth.

Another significant change is the transition from paying management fees in US dollars, as practiced in the previous agreement, to payment in New Israeli Shekels. This move reduces Knafaim's exposure to exchange rate fluctuations and creates greater certainty and stability in its revenues from the management agreement.

Scope of services and conditions

Under the agreement, Knafaim will continue to provide Global Leasing with comprehensive management services, including full-time (100%) CEO services, as well as CFO, legal counsel, bookkeeping, operations management, and marketing services, each at a 50% position scope. Management fees also include related costs such as office rent and officers' liability insurance. However, compensation for the chairman of the board and compensation for directors at Global Leasing are not included and will continue to be paid directly by Global.

The new agreement also includes certain flexibility for the future. Starting in May 2028, Global Leasing will be entitled to request the termination of certain services from Knafaim and to directly employ personnel to fill these roles. In such an event, the management fees paid to Knafaim will be reduced accordingly.

It is important to note that the entire agreement, although approved by Knafaim's board of directors, has not yet entered into final effect. It is conditioned upon receiving the approval of Global Knafaim's general meeting of shareholders, including securing a majority among minority shareholders who have no personal interest in the transaction. Until this approval is obtained, there is no certainty that the agreement extension will indeed be implemented.