El Al Airlines has reached a preliminary agreement to merge its Sun d’Or unit with the smaller carrier Israir.
Under the terms of the agreement, El Al will buy Israir from the IDB group, which is controlled by Argentinian investor Eduardo Elsztain, for $24 million plus a 25% stake in the merged company.
The price doesn’t include Israir aircraft, which the company is expected to sell to a third party and lease back, or El Al will have to buy the aircraft that have an estimated cost of $70 million.
The merger will enable El Al to better compete in the aviation market created by Israel’s Open Skies agreement with the European Union. Since the agreement, traffic in and out of Israel has been steadily growing. In April 2017, traffic rose 25.9% over the same month a year earlier.
The merger agreement still needs to be passed by the Antirust Authority and be approved by labour unions.