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Izzy Borovich is not ruling out the sale of his share of Knafaim-Arkia Holdings, the major shareholder in El Al, if he receives an offer he can't refuse. Borovich, who is El Al's board chair and vice chairman of the mother company, Knafaim, confirms that he first considered such a sale back in 2005. Borovich had spoken with Poju Zabludowicz, the junior partner in Knafaim, who was collecting shares in an apparent takeover bid. Zabludowicz still wants to increase his holdings in the company, but this time in full coordination with the controlling shareholders.

Why does Borovich want to sell out? He feels he has exhausted the challenge of El Al - although he believes Knafaim and El Al still have growth potential. Borovich's brother and sister-in-law, Dedi Borovich and Tami Mozes-Borovich have the right of first refusal on the shares, and Borovich stresses that everything at Knafaim is done by three-way agreement.

"I believe very strongly in Knafaim and El Al," says Borovich. "The two companies are worth much more today than the value at which their shares are trading."

In March 2005, Zabludowicz increased his stake in Knafaim to 15% by buying Avshalom Nuriel's shares, sparking a failed struggle for control of the company. At the time, some market sources said Zabludowicz's representatives were slow at the negotiating table, but others said a takeover would have been impossible anyway, due to Dedi and Tami's right of first refusal and Izzy's tough negotiating manner.

The struggle ended when Mozes-Borovich purchased Knafaim shares from Nochi Dankner, among others, and brought a new investor, Yehuda Levy, into the company's controlling group. Even so, today Zabludowicz is on good terms with the Borovich family.

"His name and connections open doors for us in Britain and the United States, and improves our image among the analysts," says Izzy.

Today Knafaim shares are trading at a company value of around NIS 400 million. At one time the company was worth $300 million.

"I think Knafaim should be worth much more," says Borovich. "All the things we have done and our future plans for Knafaim and El Al will make the companies worth more. The first three quarters of 2007 already show that this was a turning-point year."

El Al yesterday published its financial reports for 2007, which boast profits of $31.7 million, following $33.9 million in losses in 2006.

The plans for El Al's growth include the investment of $1.1 billion, mainly in the purchase of new planes, more flights on popular routes, the launching of new routes and more coordination with airlines operating connecting flights, with a focus on business travelers.

"The front part of the plane generates better profits," explains Borovich.

El Al also has plans to establish a leasing company and a separate cargo company. The Borovich family has world-class expertise in leasing planes, after developing this service at Knafaim.

"Since El Al was privatized the company has been contending with stiffer competition from foreign airlines, which have increased their capacity by 57% since 2006," says El Al CEO Haim Romano. "Oil prices are hitting new record highs, the dollar has sunk to less than NIS 3.40 and as if that were not enough, the geopolitical situation continues to be unstable."

El Al's new spring-summer flight schedule goes into effect this weekend, and includes five weekly flights each to Hong Kong and Los Angeles, increasing capacity 66% over last summer. Pre-flight services will be expanded to include tourists at certain hotels in Israel and New York.

"The regulation in Israel severely hampers business expansion," laments Borovich, who claims that the regulators here do not understand the aviation industry.

"This is a global industry," explains Borovich. "Israel is just one point on a global network of 8,000 points. Imposing regulations on Israeli airlines is like sending us out into a highly competitive world with our hands tied. We are good enough to compete, but not with our hands tied. Open skies must be more than just words."

Borovich says there must be total reciprocity between airports in different countries. The British airline BMI, for example, received permission to operate three flights a week from London's Heathrow airport to Ben Gurion International Airport, but Borovich was denied equal landing rights for El Al.

"Heathrow is a private airport, and they told me there is no room," says Borovich, who feels the Israeli government should look out for El Al's interests in this respect. Borovich says the problem is caused by the rapid turnover in government officials.

"I'm in this business 20 years," says Borovich, "and have been though about 13 transportation ministers and 16 tourism ministers. Each one has his own policies. Israel privatized El Al based on a prospectus detailing policies and restrictions. How can the government now change the rules of the game, after we invested millions of dollars in new equipment based on the prospectus?"