Israel also needs to approve the route and they haven't yet.
Correct. But that's a moot point until KSA allows flights to TLV through their airspace.
Also, you really think the Israelis would be talking to the Indians about getting Air India to compete with ELAL offering a superior routing? The entire story makes zero sense. Typical of Israeli journalism (where at the very least 90% of what is published is taken straight out of the imagination of the writers).