israir 298.88 courtesy.
(photo credit: Courtesy photo)
A new era of competition in the Israeli aviation industry was ushered in Monday as Tourism Minister Avraham Hirchson granted Israir designated carrier status on flights to New York.
El Al vowed to appeal the decision in the High Court saying it was a "gross violation of the obligations made to El Al, its management and workers on the eve of the [airline's] privatization."
Israir, which until now has been operating three to four weekly flights on a seasonal basis to New York, may now fly the popular route on scheduled daily flights. The permission was granted for a two-year period after which a decision regarding a possible extension will be made.
"This decision is the first small step towards bringing competition to the El Al monopoly and the eventual opening of Israeli skies," said Sabina Biran, CEO of Israir.
The next stage, she told The Jerusalem Post, would be to extend the license to Europe and "we will start that application process in the coming weeks."
In granting the license, Hirchson overturned a commitment made by the government in May 2003, before the privatization of El Al, to delay adding an extra carrier to scheduled routes until air passenger traffic rises to 10.7 million annually, which has not yet been achieved.
"In light of the data presented to me on the growth of passenger traffic across the Atlantic, it is in the public's interest to designate another carrier on the New York route," Hirchson said in announcing the decision.
In response, El Al Chairman Professor Israel Borovich said the ruling sends an extremely negative message and diminishes the trust of potential investors in government decisions and promises.
Following the decision El Al shares dropped 2.13 percent to NIS 3.86 in Tel Aviv.
The New York route has long been a cash cow for El Al and the focal point of growth for its local competitors Israir and Arkia, which for sporadic periods have operated charter flights on the route.
The airline also faces competition from US airliner Continental Airlines in the direct route and various European companies which offer connecting flights to the popular destination.
Biran noted that Israir carried approximately 5% of total passengers from Tel Aviv to New York in 2005 and expects to increase that to 10% this year as a result of the ruling and to double it annually thereafter.
Hirchson, meanwhile, turned down Arkia's application for scheduled flights to the Big Apple saying the company had withdrawn its application for the license.
Arkia said it was surprised by the "unexplainable" decision and that it was weighing what course of action to take.
While the clear winner on the day was Israir, industry sources expressed caution over the decision, saying the ball was now in Israir's court to prove that they were worthy of the route.
"They will need to offer better service and bring in more technologically advanced planes," the source said.
Biran told the Post that the company is looking to lease two extra wide-body aircraft before it lauches the daily schedule, anticipated for March, and has been in talks with both Boeing and Airbus over the last two months for the planes. "In the mid-term we will be buying two new aircraft for the route," she added.
To accommodate the extra traffic and logistics that the extra flights will bring, Biran said the company was looking to hire 200 workers.