Israeli insurance company The Phoenix Holdings has acquired a 19.9% stake in El Al Frequent Flyer Ltd, the frequent flyer subsidiary of national airline El AI Israel Airlines Ltd.
Phoenix acquired the stake after deciding to exercise the option to purchase one-fifth of El AI Frequent Flyer for $14 million, it said in a stock market filing.
The deal values El AI Frequent Flyer at $70 million. This is a substantial discount from the $500 million the subsidiary was previously valued at.
The decision by the Israeli insurer comes as the aviation industry recovers, with restrictions linked to the Covid-19 pandemic having been lifted and passengers once again free to travel.
The options had given Phoenix the right to acquire up to a 25% stake in El AI Frequent Flyer under a financing agreement signed earlier this year.
As part of the deal, Phoenix Holdings had loaned the loyalty subsidiary $130 million at an annual interest rate of 6%, with a quarterly repayment schedule.
Following the insurance company’s exercise of its options, El AI will retain 80.1% of the subsidiary and will also record a $63 million equity gain on its books for the year.
The loyalty program has approximately two million subscribers, 15% of whom hold their FlyCard credit card.
The joint purchase will mean the insurer now becomes a strategic partner of the airline, which can now launch multiple travel insurance plans with Phoenix.