Israel's Knafaim-Arkia Holdings signed an agreement to sell its small airline Arkia to the company's workers for USD$12 million, it said on Wednesday.

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

Knafaim had 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.

The sale of Arkia is subject to approval from the anti-trust authority.