Israeli flag-carrying airline El Al has signed a non-binding memorandum of understanding (MoU) to purchase its smaller competitor, Arkia.
Under the terms of the proposed deal, Arkia would become a fully-owned subsidiary of El Al. In return, Arkia’s shareholders would get a 10%-14% stake in El Al through shares and options. Arkia would continue operating as an independent brand.
It may be recalled that El Al was forced to cut down its operations and had to trim its workforce by one-third, cancel routes and reduce its all-Boeing fleet to 29 from 45 planes.
According to Reuters, the Israeli government, the two companies’ labour unions and Israel’s competition regulator have to provide regulatory approval for the deal to go ahead. In 2018, the competition regulator had vetoed El Al’s attempt to buy Israir.
“We still have a long way to go before the deal to acquire Arkia is completed, which is part of El Al’s strategy to expand into additional areas of activity,” said El Al chairman Amikam Ben Zvi.
Arkia has a fleet of seven aircraft, comprising Embraer and Airbus aircraft. These are used mainly on domestic routes and to Europe. It is no secret that El Al has long been interested in flying to the Red Sea resort city of Eilat in southern Israel — a route controlled by Arkia and Israir.
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