Israel’s El Al explores buyout of rival Arkia
El Al Israel Airlines (LY, Tel Aviv Ben Gurion) has launched negotiations to explore the possibility of buying Arkia Israeli Airlines (IZ, Tel Aviv Ben Gurion), the flag carrier revealed in a Tel Aviv Stock Exchange disclosure on the evening of October 18. The talks are still at a preliminary stage, however.
“The company is pleased to update that it has entered into contacts with Arkia Airlines and [subsidiary] Aviation Services Ltd to examine a possible transaction under which the company will acquire Arkia shares in exchange for the allotment of the company’s securities to Arkia shareholders,” the brief statement said.
Nothing has been signed, however, and “there is no certainty that the potential transaction will crystallise and that a binding agreement will be signed between the parties, and to the extent that a binding agreement is signed there is no certainty that all the approvals required by law to complete the potential transaction will be obtained.”
Although the Israeli Antitrust Authority blocked El Al’s efforts to merge with Israir (6H, Tel Aviv Ben Gurion) in June 2018 over competition fears, discussions about possible mergers involving any of Israel’s three scheduled passenger carriers have resurfaced as they continue to grapple with the Israeli government’s heavy anti-Covid travel restrictions.
Travel industry insiders have opined to local media in recent months that a merger may be needed because of the relatively small size of the country’s market and the three airlines’ ongoing difficulties.
Such a merger could allow El Al to focus more on its key market of North America while Arkia would complement it with short- and medium-haul routes to Europe and vacation packages, a field where El Al has not been particularly strong despite having its own leisure-focused brand Sun d’Or International Airlines.
Sun d’Or flights are currently operated by El Al, and the flag carrier has included a possible closure of the leisure and charter unit in its talks with unions on mapping the company’s post-Covid recovery. Last month, El Al CEO Avigal Soreq said his company intended to deepen its activities in the vacation package area.
Also at the end of last month, El Al, Arkia, and Israir appealed to the government again for financial and regulatory support, arguing that due to the strict regime of travel restrictions they are in danger of collapse. The three carriers made a similar appeal in early August. El Al intends to drastically downsize its fleet and workforce in exchange for another round of state aid and is expected to lay off 1,500 employees, 35% of the current workforce, and cut the fleet size from 45 aircraft to 29.