Israair Weighs Acquisition of Rival Arkia Amid $30 Million Losses

For passengers at Ben Gurion Airport, the competitive landscape of Israeli aviation is shifting. Israir, the country's second largest carrier, has confirmed it is evaluating a potential takeover of Arkia, the third largest. If the deal proceeds, the combined entity would hold nearly 22 percent of the market share at the airport, creating a domestic giant capable of countering the flag carrier, El Al.

The talks emerged from Arkia's ownership structure. The Nakash brothers, who control the airline, initiated the discussions as the company grapples with financial strain. Arkia reported losses of approximately $30 million in the first nine months of 2026. Projections indicate the full year deficit could reach between $50 million and $60 million, a figure exacerbated by a heavy debt load.

Lior Vider, a financial advisor and founder of the investment consultancy Profit Multiplier, described the potential deal as a strategic opportunity. He noted that Israir would gain access to Arkia's takeoff and landing slots on long haul routes to Europe, the United States, and the Far East. Securing such slots is increasingly difficult due to capacity bottlenecks at Ben Gurion. Arkia added cities like New York, Phuket, and Hanoi in the past year, though 70 percent of these flights in July were operated via costly wet lease arrangements with foreign airlines.

The transaction faces regulatory and labor hurdles. The Israel Competition Authority is expected to scrutinize the deal, weighing market concentration against the risk of Arkia's financial collapse. Labor tensions have already surfaced. On Tuesday, Arkia employees demonstrated in Bnei Brak, east of Tel Aviv, protesting unilateral moves by the owners. The workers' union warned of potential industrial action, noting that employees hold a 22 percent stake in Arkia through a partnership structure that grants them a right of first refusal on major corporate transactions.

Arkia attributed its financial challenges to a sharp surge in jet fuel prices, rising input costs, and a shifting security landscape. Since the war with Hamas began in October 2023, foreign airlines have repeatedly halted or reduced flights to and from Tel Aviv. This has made local carriers the primary reliable connection for international travel.

The airline stated that its shareholders are working to rehabilitate the company and are examining various alternatives both in Israel and abroad. For the deal to proceed, Israir would need to absorb substantial liabilities, resolve the labor dispute, and secure clearance from the competition authority. The next steps depend on whether the current exploratory phase matures into a formal transaction.