Israel's Knafaim-Arkia Holdings is negotiating the sale of its small airline Arkia to the company's workers.

Knafaim is the largest shareholder in Israel's major carrier, El Al Israel Airlines. It currently owns 40 percent of El Al, while the government holds 30 percent.

Knafaim is seeking to sell Arkia, a small carrier that flies domestic routes as well as to some European destinations, in order to comply with regulations of the anti-trust authority.

Knafaim said the two sides had not yet signed a binding agreement.