Israel's flag carrier El Al Airlines has entered a non-binding memorandum of understanding to buy Arkia.
Under the proposed deal, Arkia would become a fully-owned subsidiary of El Al. In return, Arkia's shareholders would get a 10%-14% stake in El Al through shares and options, the airline said in a regulatory filing. Arkia will continue operating as an independent brand.
"We still have a long way to go before the deal to acquire Arkia is completed, which is part of El Al's strategy to expand into additional areas of activity," said El Al chairman Amikam Ben Zvi.
Any deal would need approval from the government, Israel's competition regulator and the companies' labor unions.
Meanwhile, it is also being reported that the former CEO of El Al, Gonen Ussishkin, and former Israeli government minister, Shai BaVad, are seeking funding of US$50 million to establish a low-cost carrier in the country.