State Nixes Proposed Merger of Israir and El Al’s SunDor

The State Anti-Trust Committee on Wednesday rejected a proposal that would have seen the merger of El Al subsidiary SunDor with Israir. Acting Committee chairperson Or Schwartz said that the merger would in effect prevent El Al from running its own flights to Eilat, effectively preserving the duopoly of Arkia and Israir running domestic flights to and from the city.

Last May, El Al’s low-cost subsidiary SunDor signed a memorandum of understanding with Israir to merge operations. El Al offered to buy Israir from current owners IDB group for $25 million, in a bid to strengthen its offerings in the wake of the many new low-cost carriers that are now flying to Eilat — and the even greater competition expected when the new Ilan Ramon International Airport north of Eilat opens next year. In return, IDB group will receive a 25 percent stake in the new company besides the $24 million in cash. The deal does not include Israir planes themselves, which the company will try to lease out; failing that, El Al has agreed to buy Israir’s fleet for $70 million.

The deal was opposed by Eilat Mayor Meir Yitzchak Halevi, who in November appealed to Schwartz, to prevent the merger, which he said would harm tourism to Eilat, and tourism in Israel in general. “We are very concerned over the rumors that El Al claims that its Tel Aviv-Eilat route is not profitable,” Halevi wrote in a letter to Schwartz. “The immediate results of a monopoly on this route will be higher prices and less convenient schedules, which will harm the tourist industry and the livelihoods of many Eilat residents.”