Israeli flag-carrying airline El Al has announced it has entered into a non-binding memorandum of understanding (MoU) to purchase its smaller competitor, Arkia. The move comes after El Al was forced to cut down its operations, including trimming its workforce by one-third, cancelling routes and reducing its all-Boeing fleet to 29 from 45 planes as part of a pandemic-related government bailout.
While Arkia will become a fully owned subsidiary of El Al, the latter’s shareholders will receive between a 10% and 14% stake in El Al through both shares and options. Part of the agreement reached between the two carriers is that Arkia will continue to operate as an independent brand. According to REUTERS news agency, prior to any deal taking place, regulatory approval of the deal would be required from the Israeli government, the two companies’ labour unions and Israel’s competition regulator. In 2018 the competition regulator vetoed El Al’s attempt to buy Israir.
After a month of due diligence, the two carriers hope to reach a fully binding agreement and completion of the transaction within 150 days thereafter. “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 seven aircraft used mainly on domestic routes and those to Europe using Embraer and Airbus aircraft. This includes flying to the Red Sea resort city of Eilat in southern Israel – a route that El Al has long coveted as, up until now, it had been controlled by Arkia and Israir.
