But Sheikh Hassan Nasrallah said he did not base his conviction on facts but rather on calculations.
"My deduction is two words: 'dead and lost,' " he said in an interview on the local New TV station. It was the first time Hizbullah so explicitly explained the possibilities of Arad's disappearance because finding him or news about him would have been a prize for the group.
Israel and Hizbullah have held sporadic negotiations through German mediators over a prisoner swap that would reveal Arad's fate, but the group has said it has been unable to find any traces of Arad.
"Regretfully if we had tangible information we would have achieved an important (swap) deal," he said referring to Israeli demands for news on Arad in return for additional exchange of Arab prisoners held by Israel.
Nasrallah recounted an incident in 1989 when Arad was able to escape, saying he may have died in the mountainous countryside of southeastern Lebanon in an accident while fleeing. He speculated that no one had discovered his body.
Another theory discounting that he was still alive was that no group would continue to hold him for that long without making a financial or political demand, Nasrallah said.
'He did not know the mountain area'
After the downing of Arad's plane over southern Lebanon, his captors permitted him to have limited contact with his family through mediators until 1988. Since then, there have been no traces of him.
It was reported later that his jailers fled an Israeli attack in southeastern Lebanon and when they returned they did not find him.
"A theory is that he escaped. He did not know the mountain area. He fell in a valley, was stuck somewhere and died, with no one knowing about it. This is an analysis," Nasrallah added.
In October, a former German mediator was quoted as saying Arad died in 1996 after Hizbullah handed him over to its Iranian sponsors. But the Israeli government has said then it was still trying to learn Arad's fate and bring him home to Israel. In December, an Israeli organization offered a USD 10 million reward for information on the fate of Arad.
Eliad Shraga, the attorney representing the family of missing IAF navigator Ron Arad, said in response to Hizbullah leader Hassan Nasrallah’s statement claiming Arad is dead, “Nasrallah woke up and saw what was written on the committee that decided that Ron is dead and decided to use it for his own political gains.”
“He is doing this because he is having difficulties in Lebanon and because he was unable to implement the second part of the deal in which Mustafa Dirani was released. It’s all manipulations,” Shraga added.
Vered Luvitch contributed to the report