A Memorandum of understanding was signed on Thursday for a merger between El Al and Arkia. The two companies announced that the deal will be carried out through an exchange of shares. The owners of Arkia—the Nakash family (73%), and the employees (27%)—will receive an allotment of shares in El Al as part of the transaction. Arkia will function as the low-cost arm of the merged airline.
El Al shares jumped 6.5% on Wednesday in a higher-than-normal turnover of NIS 3.9 million ($1.22 million), this compared to an average turnover of NIS 3.2 million ($1 million) in the past 90 days. Calcalist reporter Yuval Sadeh suggested the higher-than-normal turnover raises a concern that information about the deal had been leaked.
According to Calcalist, El Al is perceived by both parties as the company whose marketing activity is weaker. Arkia’s ground services are more developed and its relative strength in the field of tourism worlds is an opening for higher profitability.
The merger will increase the fleet, with Arkia bringing in two Airbus aircraft, joining El Al’s 45 Boeing aircraft (27 of which are owned), allowing the merged company to operate more lines as well as achieve a better bargaining position vis-à-vis aircraft manufacturers in future deals.
The merger will also reduce operating costs because of staff mergers. Calcalist has learned that in the event of a merger, most of the employees will remain, but only EL AL employees would be laid off. This is why the merger must be approved by the employees. But Calcalist has also learned that the national trade union, the Histadrut, is very involved in the emerging deal, so it’s likely that the workers and management will reach an agreement.