Business
Israir in talks to acquire debt-laden rival Arkia as losses mount
By Jewish Life Staff, . Jewish Life.
Israir Group, Israel's second-largest carrier at Ben Gurion Airport by passenger numbers, confirmed last week that it had been approached about acquiring its struggling domestic rival Arkia Israel Airlines. Globes, the Israeli business newspaper that first reported the story, said the approach was driven by Arkia's deepening financial troubles.
How bad are Arkia's finances?
Arkia reportedly lost close to $30 million in the first three quarters of this year and is projected to finish the year with a total loss of between $50 million and $60 million, according to Globes. The airline, which is privately held, disputed the figures in a statement: "As a private company, Arkia does not disclose its financial data; therefore, any reports or estimates regarding its financial results should not be treated as official figures from the company."
Arkia's owners, the Nakash family, hold 89 percent of the company's shares. Its employees hold a 20 percent stake, reduced from an original 30 percent after dilution, and the two sides are in open conflict over the losses. Workers held a demonstration outside company headquarters on the day the report was published. No strike has been declared, but the report said one could disrupt thousands of passengers' travel plans later this year.
The Nakash family issued a statement saying that brothers Ralph, Joe, and Avi Nakash "have appointed Avi Hormaro, CEO of the Nakash Group, to manage the situation on their behalf" while they explore options for the company.
What Israir said
Israir Group, which is controlled by Rami Levy and managed by Uri Sirkis according to the report, confirmed the approach in a statement: "The company wishes to update that it has been approached regarding the potential acquisition of Arkia. Should the company examine this matter and reach a decision, it will provide disclosure in the customary manner, in accordance with legal requirements." The company added that no transaction was certain and that the approach carried no commitment.
For the year to date, Israir has carried about 1.56 million passengers at Ben Gurion, giving it an 11.7 percent market share. Arkia ranks third at the airport with roughly 1.44 million passengers, or about 10 percent of total traffic.
A successful acquisition would give Israir access to Arkia's route slots, the allocated takeoff and landing rights that Arkia holds to destinations across Europe, the Far East, and the United States. The report noted that slot availability at Ben Gurion has been tight, a situation made worse during the conflict with Iran when American refueling aircraft occupied parking positions at the airport and displaced passenger flights.
The regulatory question
El Al Israel Airlines is also examining a possible bid for Arkia, the report said, but industry sources quoted by the publication consider approval unlikely. El Al carried 5.1 million passengers in the first three months of this year, giving it a 37.8 percent market share at Ben Gurion, and regulators are seen as unlikely to allow the dominant carrier to absorb a significant competitor.
For Israir, the regulatory picture is less clear. Israel's Competition Authority faces a dilemma the report described plainly: it does not want a major competitor to disappear from the market, but it also does not want Arkia to collapse while deferring debt repayments. No decision by the authority has been reported.
Arkia's own management said in its statement that the question of a sale or merger "rests with the shareholders and is not a concern for the company's management, which remains focused on managing ongoing operations." The airline currently operates a fleet of seven owned aircraft and eleven others on wet lease, meaning aircraft rented together with their crews from other carriers, serving destinations from New York and Bangkok to London, Dubai, and several Greek island airports.
Source: https://en.globes.co.il/en/article-1001561979#utm_source=RSS