Arkia's Future Hangs in Balance Amidst Competing Offers and Employee Decisions
Translated & summarized from Ynet by baba
Israeli airline Arkia's future is uncertain as employees weigh a takeover offer from a group led by Yariv Lerner against a revised proposal from investor Ezra Ungar. The Lerner group's offer would see employees lose their shares, while Ungar's offer includes a board seat and some shares but maintains a demand for Shabbat closure. Arkia is facing significant financial losses due to rising fuel costs and unprofitable new routes.
The story in 5 lines · by baba
- Arkia employees must decide by Monday evening on a takeover offer or present their own.
- A group including Yariv Lerner has agreed to buy a controlling stake from the Nakash brothers.
- Investor Ezra Ungar has submitted a revised offer including a board seat and some shares.
- Arkia has suffered approximately $30 million in losses this year and faces a difficult winter quarter.
- The airline's crisis is compounded by unhedged jet fuel costs and unprofitable chartered flights.
The fate of Israeli airline Arkia is nearing a critical juncture as employees must decide by Monday evening whether to accept a takeover offer or present their own. A group of businessmen, including Kidon Dahari, Yaron Adib, Yariv Lerner, and Einav Adib Birer, has agreed to purchase a controlling stake in the company from the Nakash brothers. This offer comes with a significant caveat for employees: they will lose their current 22% shareholding.
Meanwhile, the employees have re-engaged with investor Ezra Ungar, who previously made an offer that was rejected due to his demand for the company to cease operations on Shabbat. Ungar has submitted a revised proposal that maintains the Shabbat closure requirement but offers employees a single board seat, a few percent of the company's shares, and protection against layoffs and restructuring. However, a single board seat without additional voting rights may leave employees with minimal influence.
Arkia is facing severe financial difficulties, with losses of approximately $30 million reported since the beginning of the year, leading to a deficit in its equity. The company is expected to end the year with even greater losses, as the fourth quarter is typically the most challenging for the aviation industry. The Nakash brothers were reportedly willing to cede control without compensation in exchange for capital injection and even offered to invest an additional $8.5 million themselves.
The airline's crisis is exacerbated by a doubling of jet fuel prices compared to last year, a cost Arkia did not hedge against, unlike competitors Israir and El Al. Furthermore, Arkia is operating new, costly routes to the US and other distant destinations using chartered aircraft, which are incurring losses due to low occupancy rates.
