El Al has launched legal action to merge with Arkia Airlines, in an attempt to overturn an original takeover condition, set by the Israeli antitrust authority, ordering Arkia owner Knafaim-Arkia Holdings to sell off the airline, writes Aimée Turner.
The Israeli flag carrier last week filed an urgent petition with the Restrictive Trade Practices Tribunal for a temporary injunction to delay implementation of the original merger terms on the day it appointed a new board of directors, which includes representatives of Knafaim-Arkia. The tribunal has adjourned the case for six weeks.
El Al says that, because these representatives have a duty to implement the conditions established for the merger, an injunction is necessary to safeguard its economic interests. Furthermore, it says that the merger terms effectively prohibit El Al and Arkia from amalgamating, even though there is no significant threat to competition.
Israel's anti-trust commissioner Dror Strum gave Knafaim the green light in August to take over the Israeli flag carrier by the end of the year on condition that it sold its entire aviation and tourist businesses. Knafaim went ahead in December and paid $21.7 million to exercise 71.29 million options in El Al, making the business the airline's largest shareholder, with a 40% controlling stake and an option to take another 12% stake before June 2007.
The wholly owned businesses and stakes to be sold as a condition of the takeover include carrier Arkia, while El Al's charter arm - and Arkia rival - Sun D'or must be withdrawn from routes that are already served by El Al's scheduled services.
El Al has used this division to operate some services on the Jewish sabbath, and is contesting this ruling.
Source: Flight International
