The Histadrut labor federation threatened to ground all flights in and out of Israel starting on Tuesday at 6 a.m. after the cabinet approved an Open Skies agreement with the European Union on Sunday.

Israeli airlines El Al, Arkia and Israir and the Histadrut embarked on the strike Sunday morning in an attempt to head off the proposal – which promised to lower prices, broaden the base of flight destinations and boost tourism by liberalizing routes between Israel and the European Union over five years – charging it would result in layoffs.

Despite the strike and protests by some 500 airline workers gathered outside the cabinet meeting, the government passed the agreement by an overwhelming majority, leading the Histadrut to announce that the strike would continue and that the Israel Airports Authority would join the strike in solidarity on Tuesday, unless the Treasury and the Finance Ministry agreed to alter the agreement in negotiations.

Transportation Minister Israel Katz dismissed that possibility out of hand in an interview with Channel 2 Sunday evening.

Members of the cabinet insisted that the deal would yield positive results for the country and the economy.

“This is the first decision by the new government aimed at bringing down the cost of living in Israel,” said Katz, noting that the agreement would align Israel with European aviation standards on issues such as consumer and environmental protections.

Open Skies agreements within the EU llowered air prices 34 percent from 1998-2002, Katz said, while growth in passengers nearly doubled.

“The Open Skies reform is good for Israel,” Finance Minister Yair Lapid said.

“It will lead to lower prices and increased competition, and won’t harm the number of jobs in the economy, but quite the opposite.”

Lapid cited the Israel Manufacturers Association as saying the agreement could lead to tens of thousands of new jobs being created.

Prime Minister Binyamin Netanyahu lauded the agreement.

“The goal of the reform that we approved today is to lower the prices of flights to and from Israel and to increase incoming tourism,” he said.

“I commend Finance Minister Lapid and Transportation Minister Katz for working to pass this reform, which has been discussed for many years.

“We will continue to advance reforms to lower the cost of living and increase the efficiency of services to Israeli citizens.”

Cabinet members Amir Peretz, Sofa Landver and Yitzhak Aharonovitch voted against the agreement.

Histadrut chairman Ofer Eini met with Netanyahu late Saturday night to try to postpone the cabinet decision, which he said would be “difficult and destructive,” and warned that the strike could go on indefinitely.

Katz criticized the Histadrut’s efforts to block the agreement, saying that El Al had made no efforts to reorganize and become more competitive.

“At El Al there are 40 airplanes and 6,000 workers, whereas the company Air Berlin has 200 airplanes and 9,000 workers. By this comparison, Air Berlin should have had 30,000 workers,” he said.

Transportation Ministry director-general Uzi Yitzhaki also blasted El Al for its finger-pointing, telling Army Radio in a Sunday morning interview that “the dire condition of the El Al company is a result of failed management.”

“Since 2004, when El Al was privatized, we have only seen its financial situation deteriorate. The failed management of the El Al administration has brought it to this state, irrelevant of any connection to Open Skies,” he said.

The agreement will go only into effect in April 2014, which Lapid said would give the airlines plenty of time to conduct a dialogue with the government about their needs.

Economy and Trade Minister Naftali Bennett praised Katz and Lapid for the agreement in a post on Facebook, saying the drawn-out time frame for implementing the agreement will give El Al time to prepare for its consequences, and that “the company must become efficient in order to thrive.”

The agreement, Bennett added, will help the economy as a whole by lowering air costs for Israeli companies exporting their goods abroad.

El Al complained that the deal would not level the playing field as promised, but pile onerous burdens on Israel’s airlines while opening up opportunities for European competition.

According to the company, Israeli airlines have an unfair disadvantage in that they are required to provide customers with full refunds on canceled tickets, whereas foreign airlines are not.

Additionally, the agreement opens up more landing slots for European airlines than it does for Israeli carriers, El Al said.

Finally, Israeli airlines spend significantly more on security than their foreign competitors, a financial burden it says can make the difference between profits and losses.

“The proposed Open Skies agreement ties the hands of Israeli airlines, without taking into account the restrictions imposed on them. The agreement is tailored to fit the giant companies and aviation unions from Europe, and will eventually lead to Star Alliance taking over the Israeli aviation market,” the company said.

Lapid and Katz agreed to respond to questions ministers raised during the cabinet’s discussion within 45 days.

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