Israir weighs takeover of debt-ridden local rival airline Arkia

Israeli carrier Israir confirmed Wednesday that it is considering taking control of debt-ridden local rival Arkia Israel Airlines, in a move that could reshape the country’s commercial aviation landscape.

The preliminary talks, first reported by business daily Globes, follow a year in which Arkia, the country’s third-largest carrier, has been on the block while grappling with an escalating financial crisis and a dispute with employees.

Israir, the country’s second-largest airline after flag carrier El Al, emphasized that the discussions remain exploratory. The company, controlled by supermarket mogul Rami Levy, stressed that “there is no certainty that the evaluation will mature into a transaction.”

“For Israir, it would represent a strategic and highly opportunistic deal to capitalize on a rival’s liquidity distress and alter the balance in the Israeli aviation landscape,” Lior Vider, financial advisor and founder of investment consultancy Profit Multiplier, told The Times of Israel. “A merger of both carriers would create a domestic aviation giant with an aggregate market share of nearly 22% at Ben Gurion Airport, creating a genuine counterweight to flag carrier El Al.”

In addition, Israir would secure Arkia’s valuable takeoff and landing slots on long-haul routes to Europe, the US and the Far East, which are difficult to obtain in light of capacity bottlenecks at Ben Gurion, Vider said.

The Nakash brothers, the controlling owners of Arkia, approached Israir as the ailing carrier has reportedly racked up steep losses over the past year. In the first nine months of 2026, the airline posted losses of about $30 million, and it is projected to end the full year with a deficit of $50-60 million alongside an onerous debt load.

While Arkia said that as a privately held company, it does not publicly disclose its financial results, the local airline acknowledged that severe cost pressures have strained its operations over the past year.

“The sharp surge in jet fuel prices, rising input costs and a shifting security landscape are impacting airlines both in Israel and globally, and Arkia is no exception,” Arkia stated.

Arkia operates domestic flights and routes to major European cities. Over the past year, the airline significantly expanded its long-haul destinations, including New York, Thailand’s Phuket and Vietnam’s Hanoi, despite a challenging period for the aviation sector. Most flights ostensibly operated by Arkia use aircraft leased, along with crews, from foreign airlines. In July, 70 percent of Arkia’s flights were operated through costly wet lease arrangements.

“In light of the situation in which the company has found itself… the shareholders are working vigorously to rehabilitate the company and are examining various alternatives in Israel and abroad,” Nakash Group said.

A merger or acquisition between Israir and Arkia would likely face fierce scrutiny from Israel’s Competition Authority, as the country’s commercial aviation landscape is dominated by four airline operators – El Al, Israir, Arkia and Air Haifa.

“The primary hurdle facing the deal is expected to be clearance from the Israel Competition Authority, which will have to weigh the hit to market concentration against the risk of Arkia’s potential financial collapse,” said Vider.

As foreign airlines have repeatedly halted or reduced their flight operations to and from Tel Aviv since the war with the Hamas terror group on October 7, 2023, local carriers have been the only ones reliably flying in and out of Israel, a fact that has been critical to maintaining the country’s air bridge to the world.

The takeover talks come a day after Arkia employees demonstrated in Bnei Brak, east of Tel Aviv, against unilateral moves by the carrier’s controlling owners ahead of a potential sale, which they fear will undermine workers’ rights and job protections. The workers’ union warned that it will fight any violation of employees’ rights, job security or status at the company and threatened industrial action that could disrupt the travel plans of thousands of passengers.

Employees hold a 22 percent stake in Arkia through a partnership structure that grants them a right of first refusal on material corporate transactions.

“For a deal to be completed, Israir would have to absorb substantial liabilities, resolve a complex labor dispute with Arkia’s workforce and win clearance from the Israel Competition Authority,” said Vider. “Arkia is currently in a financial crisis, and without a buyer, the alternative could be bankruptcy, which would put hundreds of employees out of work.”

“Given this pressure, the Histadrut Labor Federation is likely to support a sale, while regulators might approve a deal subject to specific conditions, if they conclude that the alternative — Arkia’s financial collapse — would be far worse for the traveling public,” said Vider.