Sadly the Israeli antitrust has been banning most merger attempt across industries. In Telecoms, where we have 5 carriers, they blocked a merger. And the same thing will likely happen with Bank Mizrahi and Union Bank
The question is whether they are actually promoting competition, or breaking up monopolies/duopolies?
In this case the cited a cementing of the duopoly that flies into Eilat as a reason. That sounds odd to me, as AFAIK ELAL doesn’t fly to Eilat (does Sun D’Or?) so it’s being shot down due to perceived potential competition? Also this is being done at a time when open skies is aggressively being promoted, so it really sounds odd.
OTOH, would the decision be different if ELAL would spin off Sun D’Or? How does Sun D’Or contribute to ELAL’s bottom line?
As a side note, IINM both Sun D’Or and Israir schedule flights on Shabbos.