Arkia Israeli Airlines has estimated its monthly losses to be 10 million shekels ($3.11 million) on average if the company goes through a merger with Israel's national airlines, Arkia executives reported.
Arkia would have to give up flying during Shabbat as El Al does to complete the merger, following Jewish tradition.
Between 15 percent to 28 percent of Arkia's flights to Eilat every month and about 12 percent of its flights to foreign destinations are on Shabbat and Jewish holidays, which would mean canceling most of them if the merger comes through.
Since Arkia is the only Israeli airline flying on Shabbat and Jewish holidays, no Israeli airlines will be flying on those days if the company cancels the flights. El Al does not fly passengers on Shabbat and Jewish holidays, nor does Israir, another Israeli airline. The company halted its flights on Shabbat in April 2021, after BGI, a group owned by supermarket moguls Rami Levy and Shalom Haim, acquired it.
Halting flights on Shabbat would have two main implications: The first one being the removal of the last form of public transportation to Eilat between Friday evening and Saturday evening, which would mean that the residents of the far southern city needing medical treatment on those days would be unable to fly, and doctors would not be able to get there and provide treatment on those days.
The other consequence of the merger would be turning over an important part of the air travel business to foreign airlines, which will damage local airlines' competitiveness.
The companies announced they would go through a stock swap and signed an agreement in principle for the merger in February.
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The Nakash family is now the controlling owner of Arkia, with a 70 percent holding. Employees own the remaining 30 percent via the Tut Holdings company. According to the memorandum of understanding — a nonbinding agreement that states each party's intentions to take action, conduct a business transaction, or form a new partnership — the merger agreement stipulates that El Al will buy all of Arkia's shares and allocate 10 percent of the company's stock and 10 percent of El Al's options to Arkia's shareholders once the deal is done.
Following the merger's announcement, Arkia's employees have expressed concerns over the meaning of the merger for their future in the company.
What's the point of the deal?
Gadi Tepper is the CEO of Arkia, a 300-employee company that includes 60 pilots. It flew 220,000 passengers on international flights in 2021, representing 3.6 percent of Ben-Gurion International Airport's traffic, compared with 6 percent for Israir and 23 percent for El Al. Arkia also flew 367,000 passengers to Eilat in 2021 and held a 58 percent market share over that route.
Halting operations on Shabbat raises the question of the economic feasibility of the merger for Arkia, a company executive said. The merger would significantly harm profits since 15 percent of Arkia's flights occurred during Shabbat in March.
In April, this figure climbed to 30 percent, said the executive, adding that it is hard to say whether the merger would provide any financial benefits since it would remove a large share of Arkia's flights.
Even before the coronavirus pandemic, Arkia was already losing money, so the Shabbat flights are a significant factor– as aviation industry experts expect strong demand for air travel this year. The overcrowding at Ben-Gurion, which started in March and has only gotten much worse since the beginning of the Passover holiday, clearly indicates the change.
On Thursday, the busiest day at the airport since the outbreak of the coronavirus pandemic, 75,000 passengers passed through it.
The Israel Airports Authority estimates that 18 million passengers will use the airport in 2022, approaching pre-pandemic numbers.
"It is clear that such a merger deal does not serve the company's interests – but only the personal interests of the CEO and the Nakash brothers, the owners of the airline," Tut Holdings stated.
Arkia declined to comment.