Israir Explores Arkia Acquisition Amidst Financial Struggles
Translated & summarized from Globes by baba
Israir is considering acquiring competitor Arkia, which is owned by the Nakash family and facing significant financial losses. El Al is also reportedly exploring a potential deal. A merger could consolidate the domestic flight market, but faces regulatory hurdles and concerns about competition. Previous merger attempts involving Arkia have failed. Rami Levy, owner of Israir, acknowledged the complexity of the potential deal, citing the need for regulatory approval.
The story in 6 lines · by baba
- Israir is exploring the acquisition of struggling airline Arkia, with El Al also showing interest.
- Arkia faces substantial financial losses, projected to reach $50-60 million this year.
- A merger could create a dominant player in domestic flights, holding nearly 97% of the market.
- Previous merger attempts involving Arkia and other airlines have failed due to regulatory or employee opposition.
- Experts are skeptical about regulatory approval, citing potential harm to competition on key routes.
- Rami Levy, owner of Israir, noted the deal's complexity and the need for competition authority approval.
Israir, owned by businessman Rami Levy and managed by Uri Sirkis, is considering the acquisition of its competitor Arkia, which is owned by the Nakash family. El Al is also reportedly evaluating the possibility of acquiring Arkia. These potential deals come as Arkia faces significant financial losses, estimated at around $30 million in the first three quarters of the year, with projections of a full-year loss between $50 million and $60 million.
Between January and September, Israir carried approximately 1.5 million international passengers, and Arkia carried about 1.4 million. A merger between Israir and Arkia could dramatically reshape the domestic flight market, where together they hold nearly 97% of the traffic. This consolidation would likely make the combined entity the sole operator of domestic flights, excluding the newly launched Air Haifa.
This is not the first time a merger involving Arkia has been considered. In 2018, a proposed merger between Israir and El Al's subsidiary Sun D'or was blocked by the Antitrust Authority due to concerns about a duopoly on flights to Eilat. In 2020, during the COVID-19 pandemic, the Nakash family proposed buying Israir and merging it with Arkia, but this also fell through. Later that year, Arkia's merger with El Al was called off due to employee opposition, partly over concerns about flights on Shabbat. Most recently, in 2023, initial talks for Arkia to merge into Israir did not materialize.
Arkia's current financial difficulties are compounded by internal disputes. Dozens of Arkia employees protested against management's intention to dilute their ownership stake, which has decreased from about 30% to 20%. The company has been on the market, with previous reports indicating advanced negotiations with a group led by businessman Eliot Zaml and later with businessman Ezra Unger, both of whom reportedly backed out.
Aviation experts express skepticism about the deal's approval by the Competition Authority, citing potential damage to competition on both international routes, like New York, and domestic ones. However, aviation expert Dr. Uzi Freund-Feinstein notes that the Authority might consider approving it to prevent Arkia's potential collapse due to its heavy losses. Lior Weider, an investment consultant, highlights that while acquiring Arkia offers Israir a chance to expand significantly, it also means absorbing substantial debt, managing complex labor disputes, and navigating regulatory hurdles. Arkia's management stated that the company's financial data is private, while the Nakash family confirmed they are exploring options to rehabilitate the company. Israir acknowledged the inquiry into Arkia, emphasizing that no certainty of a deal exists.
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