Israeli flag-carrier El Al is considering the purchase of up to 20 % of Knafaim, the holding company of Arkia, the country's number two airline and largest private carrier.
El Al and Knafaim aim to create an airline group better able to cope with the crisis in the Israeli market, in large part caused by the recent plunge in passenger numbers due to the ongoing conflict with the Palestinians.The El Al board gave approval for negotiations to get under way last week.
If the scheme goes ahead, Arkia will become the low-cost arm of the group, while El Al will concentrate on the high-yield, medium- to long-haul market. Arkia runs a mixed fleet of ATR and Bombardier turboprops and Boeing 737s and 757s on scheduled and charter flights. By contrast El Al's fleet is primarily based around Boeing 757s, 777s and 747s.
Some 58% of Knafaim shares are held by the Borovitch family, with Koor, Israel's largest industrial concern, owning 28%, and 14 % held by the public.
Israel Borovitch, Arkia's president, says the plan will serve both airlines well. "I'm for creating a large aviation group that will be able to cope with the market," he says.
If the talks are successful, the deal bringing together the country's two largest airlines will have to be approved by the Israeli anti-trust agencies. The expectation is that the deal could get the okay, but with limitations on the planned shares purchase.
• The growing cargo-carrying capacity in the Israeli market has caused a dramatic drop in air freight prices. Cargo volume handled by Ben-Gurion airport in Tel Aviv in 2000 was 13% greater than the previous year at 333,000t. Government data, however, shows air freight prices slumped 15% as a result of increased capacity, largely provided by the independent cargo newcomer CAL.
Source: Flight International
