Antitrust Authority nixes El Al-Israir merger

El Al, photo: Sivan Farag

Deputy Antitrust Commissioner Adv. Uri Schwartz ruled that the proposed merger would harm competition in both domestic and international flights.

Deputy Antitrust Commissioner Adv. Uri Schwartz has rejected the application from Israir Airlines and Tourism Ltd. and El Al Israel Airlines Ltd. (TASE: ELAL) to be allowed to merge.

The decision was on two grounds. The first is that a merger would rule out any possibility of El Al competing in flights to Eilat, and would consolidate the duopoly of Israir and Arkia on that route. The second is that the proposal raises fears of diminished competition on international flights, because of the complete dependence of the Israeli airlines, particularly Arkia, on the overseas aviation security services provided exclusively by El Al.

El Al stated in response: "El Al sees this as a mistaken decision that first and foremost preserves Arkia's monopoly on the route to Eilat. Arkia operates 70% of the flights on that route. El Al presented to the Antitrust Authority a financial projection that makes clear why this is a loss-making activity for it and why it has no intention of introducing flights to Eilat, regardless of the fate of the merger. Indeed, it chose to abandon that service several years ago. El Al even made a commitment to the Antitrust Authority that after the merger Israir would buy two additional aircraft for use on the service to Eilat, which would increase the frequency of flights and bring down fares, from which the public would benefit."

Separately, El Al reported yesterday that it had received $135 million in financing from a consortium of overseas banks for the purchase of a Boeing Dreamliner 787-9 aircraft. El Al ordered the plane from Boeing in October 2015, and it is due to be delivered by the end of this quarter.

The finance is made up of a loan of $114 million at three-month Libor (currently 1.7%) plus a margin, repayable in quarterly payments over twelve years, and a subordinate loan of $21 million at three-month Libor plus a margin, repayable in quarterly payments over six years. The weighted interest margin is between 1.50% and 2.50%. The loan will be taken through a special purpose vehicle, and will be secured by a lien on the aircraft, an assignment of El Al's rights in relation to insurance of the aircraft, and warranties from Boeing for the aircraft and from Rolls Royce for its engines.

<p><i>Published by Globes [online], Israel business news - <a href=http://www.globes-online.com>www.globes-online.com</a> - on January 11, 2018</i>

<p><i>© Copyright of Globes Publisher Itonut (1983) Ltd. 2018</i>

Published by Globes [online], Israel business news - www.globes-online.com - on January 11, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

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El Al, photo: Sivan Farag
El Al, photo: Sivan Farag
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