Sources inform ''Globes'' that Arkia Airlines will be forced to cancel plans to begin operating flights to New York, after having acquired a stake in El Al Israel Airlines. This week, Arkia purchased 4% in El Al shares, and its package includes options likely to increase its El Al holding to 20%.
The Tel-Aviv - New York line, which carries 800,000 passengers every year, is El Al's main center of activity. Currently El Al has only one competitor, Continental Airlines (NYSE:CAL), which runs a limited number of flights. El Al also runs charter flights to New York, via subsidiary Sun D'or International Airlines.
Arkia first took the initiative to run New York flights about two years ago, but in the end withdrew the plan. About a year ago, Israir decided to begin New York flights, and Arkia entered as a partner into the plan.
However, a few months ago, Israir and Arkia decided to postpone their jointly operated charter flights to New York, due to "the economic situation, and the dramatic decline in passengers". The partners claimed that there were a number of other factors in their decision, such as the state of the airline industry in a global recession, the war in Iraq and the SARS epidemic. Some time later, Arkia and Israir said they planned to begin operating flights to New York next summer.
Arkia president and CEO Prof. Israel (Izzy) Borovich said in response: "There are some problematic aspects to the matter of New York flights, and it could be that Arkia will have to cancel some activities due to having become a partner in El Al".
Published by Globes [online] - www.globes.co.il - on 12 June 2003