Knafaim-Arkia, holding company of privately owned Arkia Israeli Airlines, and the Zeevi investment group have together taken a 75% stake in Balkan Bulgarian Airlines for a bargain price of $150,000 - but have also agreed to invest $100 million in restructuring the airline over the next 10 years.
Knafaim-Arkia will control 49% of the stake, and the Zeevi group 51%. Arkia president Israel Borovitch says a new management team should be in place in Sofia by 15 July.
The investment is in line with Arkia's policy of expanding its international operations. An Israeli source points out that Bulgaria is strategically located mid-way between the Middle East and Western Europe.
Debt-laden Balkan Bulgarian owns no Western aircraft and proved unattractive to major airline investors.
Arkia was successful in the face of competition from Ulrich Behdeler Atakan of Germany, a Russian aviation consortium including Tupolev, and two offers from Luxembourg investors.
Reports from Israel suggest flag carrier El Al was also a potential bidder for Balkan, but was prevented from making a move by the Israeli Government, which does not believe that the airline should take on debts without itself being privatised.