The pandemic has caused the Israeli flag carrier, El Al, to think of new business strategies to remain afloat. Despite its own financial situation, El Al was prepared to buy rival carrier, Arkia. However, it would seem all the preparation and talks may be going to waste as the merger deal between the two Israeli airlines is not progressing further.
Tired of waiting
Despite still being open to negotiations, Arkia is tired of waiting for a formal merger confirmation by El Al. The smaller airline is currently talking to alternative buyers keen on taking it over and replacing the current shareholders, brothers Avi, Joe, and Raffi Nakash. The three brothers hold approximately 70% of the shares in the company, and employees of Arkia hold the remaining percentage via the Tut Holdings company.
Up until now, Arkia has been banned from talking with other buyers, as the exclusivity was given to El Al. Unfortunately for the flag carrier, the exclusivity period ends on June 29th, and Arkia has expressed no wish to extend it. Without the extension, potential buyers can now obtain details about Arkia and start a due diligence process while negotiating. Additionally, Arkia now has the freedom to explore the option of a public offering, similar to that of rival airline Israir, which recently raised NIS 25 million ($7.31 million) at a valuation of NIS 250 million ($73.03 million).
Another possibility that Arkia was looking into for future growth was an attractive leasing deal on some Airbus aircraft, which would prove a great benefit to enhancing capacity for the airline. Still, all remains to be seen for El Al as time is running out, and as Arkia stated:
"Arkia is a private company that continues to conduct negotiations for the sake of its development."
No real benefit
Besides depleted patience, Arkia is willing to move past El Al as even if the flag carrier makes a move, consent is required from the employees of Arkia. This is where the tides do not turn in favor of El Al, as most of the airline's employees are vehemently opposed to the merger, having described it as a dangerous threat to Arkia's existence. In the eyes of Arkia's employees, the merger would have been between a healthy airline such as Arkia and a flailing airline such as El Al.
The employees have noted that one consequence of the merger would have been the complete stoppage of flights on Shabbat (Saturday), a circumstance unique to Arkia as the only Israeli airline flying on the day. Considering that El Al does not fly during the Shabbat, the merger would have meant that Arkia would lose an estimated monthly loss of NIS 10 million ($3.11 million) on average. With such significant harm to the profits of Arkia, employees have doubted that the merger would do the airline any vital good if it were to remove a large share of Arkia's flights.
Retorting that the merger does more harm than any good, Tut Holdings previously stated:
"It is clear that such a merger deal does not serve the company's interests – but only the personal interests of the CEO and the Nakash brothers, the owners of the airline."
The merging line
Seeing as June 29th is merely a couple of days away, it is uncertain whether El Al will make any decisive moves to progress with the merger. It also remains unsure which other potential buyers could be in talks with Arkia, but hopefully, the deal agreement would be better than what was previously offered. However, with the aviation industry recovering steadily in Israel, perhaps there would be no need for any acquisition of Arkia after all.
Source: Globes