Government dumps El Al for Alitalia

Already feeling the effects of stronger competition from foreign airlines this year, El Al bashed the decision, calling the move puzzling in light of recent events in the country.

August 23, 2006 08:31
2 minute read.
el al flag logo 88

el al flag logo 88. (photo credit: )


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The government added to El Al Israel Airline's woes Tuesday, signing an agreement with Alitalia to be the prefered carrier for public servants flying abroad on official business. Already feeling the effects of stronger competition from foreign airlines this year, El Al bashed the decision, calling the move puzzling in light of recent events in the country. "Even in these days when the Israeli aviation industry is absorbing so much damage from the war in the North, the government found it appropriate to publish another tender and with it strengthen the foreign airlines," said Haim Romano, El Al chief executive officer. "In the past few weeks our pilots have divided their time between reserve duty and flying passengers to and from Israel, and this is the reward the government presents to them." Accountant General Yoram Zalika signed an agreement with Alitalia to give government workers discounts on work-related travel, the Finance Ministry said Tuesday, adding that the move was aimed at gaining cheaper fares for government bodies. "This is part of the government policy, which started with the privatization of El Al, to purchase tickets based on the cheapest price and not on the basis that it was obligated to buy from EL Al as it had been accustomed to doing," a Finance Ministry statement read. Under the agreement, in addition to discounted rates on tickets the government purchases for its workers from Alitalia, it will also receive free scheduling changes, special rates for overweight luggage and other services. The ministry added that workers were not obligated to fly Alitalia and were free to find better deals and more convenient scheduling. Zalika said he hoped the agreement would serve as a catalyst to set up a government agency to deal with travel, which would handle all pricing matters including hotel accommodations. "Such a process will save the government around NIS 10 million per year, once it is in place," he said. Meanwhile, as the government said the aim of the agreement is to open its business to competition among foreign airlines operating in Israel, the deal served as an added blow to El Al, which was already feeling the heat from the added competition in the market this year. In an attempt to adopt a more liberal aviation policy, or "open the skies", and in answer to higher tourist demand, the government allowed foreign carriers to increase their capacities on the Tel Aviv route starting in April this year, putting added pressure on the Israeli carrier and forcing it to issue a profit warning for the rest of the year. Criticizing the government for harming Israeli aviation in the process, the company last week reported a loss of NIS 15.1m. for the second quarter, citing an "unprecedented 29 percent rise in competition" among its reasons for the poor performance However it was the patriotic card the company played this time in response to the government move to the green, white and red flag carrier. "Just last week, Prime Minister Ehud Olmert called El Al the national carrier when we brought in three plane loads of Olim Hadashim [with Nefesh B'nefesh] and now they sign an agreement dafka with the Italian airline," Romano said. "This is very peculiar behavior and I doubt the Italian government would do the same thing to its national carrier."

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