Israeli carrier Israir announced on Wednesday that it is examining a potential acquisition and merger with rival Israeli airline Arkia.
The move, which would combine Israel’s second- and third-largest airlines, comes as Arkia faces severe financial pressure with reported annual losses in the tens of millions of dollars.
Israir said on Wednesday that it has been approached about a potential acquisition of Arkia, but added that an agreement was not certain.
Debt-ridden Arkia, Israel’s third-largest airline, has been on the market for the last year amid financial troubles, even as it increased its service to both Asia and the United States.
“During the current challenging period, against the backdrop of rising fuel prices and a changing geopolitical reality, Arkia continues to act responsibly by making the necessary adjustments, while keeping its customers, employees and continued operations as a strong Israeli airline at the top of its priorities,” Arkia said in a statement.
Israeli supermarket magnate Rami Levy is the primary controlling shareholder of Israir Group, while the Nakash brothers primarily own Arkia through Jordache Enterprises.
Any merger or acquisition between the two carriers would require approval from Israel’s competition and antitrust authority.
Israel’s smaller local airlines, Arkia and Israir, have both joined El Al on the lucrative Tel Aviv–New York route, ending a long period of limited competition and driving down high airfares.
Israeli travel consultants said Wednesday that a merger among smaller carriers could benefit consumers by building a stronger competitor to El Al.
“Israir’s acquisition of Arkia and its fleet of 13 aircraft will establish Israir as a true competitor of El Al,” Mark Feldman, CEO of Jerusalem’s Ziontours, told JNS on Wednesday. “For years, El Al has been able to have a near monopoly on dozens of destinations, setting air fares with little concern about a response from Israeli airlines whose market share has been insignificant. Israir will have the resources to compete head-on in many markets with El Al, signaling a potential price war, which will benefit the Israeli consumer.”
“Israel has a clear interest in having strong, stable local airlines, alongside competition that ensures the public has choices and affordable prices, said Yoni Waksman, deputy chairman of Israel’s Ophir Tours. “Should a deal take shape between Israir and Arkia, the litmus test must be what it offers the passenger: more seats, more destinations, and better service. Merging the companies could bolster their operational capabilities, but these efficiencies must also translate into benefits for the consumer. From the perspective of the tourism sector, stability and competition are two objectives that must coexist.”
