MIAMI – El Al Airlines (LY) has informed the Tel Aviv Stock Exchange (TASE) that it is in preliminary talks to purchase Israeli competitor Arkia (IZ).

Israeli business news outlet Globes reports today that LY has begun discussions with IZ over a possible agreement in which the firm would buy IZ’s shares in exchange for an allocation of the company’s securities to IZ shareholders, according to the LY.

For context, the Israeli Competition Authority declined to allow LY and Israir (6H) to merge in 2018, citing concerns that competition on the Eilat route would be jeopardized. However, in the aftermath of the COVID-19 pandemic and the struggle for airlines to survive the crisis, the discussion of probable mergers between Israeli airlines has reappeared.

Arkia I-NDOF Boeing 767-306(ER). Photo: Alberto Cucini/Airways

Long/short-haul Combination

Due to the relatively limited size of Israel’s market and the airlines’ dilemma, Globes notes that many travel experts believe that a merger is required. LY would be able to focus more on North America as a result of the merger, while IZ would provide shorter-haul services to Europe and vacation packages, something the former has not been very successful in.

El Al noted in its announcement to the TASE that, “No memorandum of understanding or agreement has been signed between the parties and the negotiations are only at the outset.”

The airline warned that there was “no certainty that a potential deal will be formed and a binding agreement will be signed between the parties, and if a binding agreement will be signed, there is no certainty that all the required approvals according to law would be received for completing the potential deal.”

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Featured image: El Al 4X-EDE Boeing 787-9. Photo: Ryan Scottini/Airways