El al plane at rest 370.
(photo credit: REUTERS)
Now that Israel’s airline strike is over and the government’s “Open Skies”
policy, allowing competition in flights to Europe, is moving forward, Israelis
can enjoy a small victory. The fact that El Al and other Israeli companies were
able to coerce the government into paying for almost all their security expenses
is however a victory for chutzpah.
A good number of people fly El Al not
because of the outstanding flight service, the comfort of the planes or
Hebrew-speaking attendants, but because of a feeling of tighter
Security is a selling point and a marketing asset for El Al,
just as leg room is for Qantas or low prices for EasyJet. Without this security
edge, El Al might well lose many of its customers.
Is it a fair outcome
of an airline strike intended to prevent competition to have taxpayers, some of
whom never use El Al, pay for most of its security costs and its marketing
niche? Would it be fair for the government to subsidize kosher meals on flights,
or more comfortable seats? The fact is that El Al’s employees have no moral case
for opposing the implementation of the Open Skies agreement.
Most of them
will not suffer from it. In fact, many will benefit from the increase in travel
and tourism that will result from Open Skies.
It is true that they will
have to compete with other companies, and may even have to learn more about
customer service and smiling. But more importantly, El Al’s owners and
management will have to learn about efficiency and profitability. Until now,
their quasi monopoly status had shielded them from competition, and it is natural
that they reacted badly when someone tried to take away their abnormal
El Al’s employees are better paid than most Israelis with
comparable jobs and receive handsome benefit packages.
Only the employees
of very protected and unionized industries receive comparable compensation.
Although El Al was privatized, it continues to operate in much the same way as
the Israel Electric Corporation, Israel’s ports and Israel Railways do,
extracting “monopolistic rent” from its customers.
Ministry accountant general Prof. Yaron Zelekha claimed recently that “El Al
executive salaries are contrary to all professional criteria accepted in the
Those “unreasonable” salaries are the cause of
El Al’s low profitability, not the security costs.
Open Skies is a
It will bring more tourists to Israel, will make
traveling cheaper for Israelis and will bring overall economic growth to our
Europe loosened restrictions on consumer transportation as early
as 1987, and by 1997, an Open Skies policy was fully implemented within the
European Union. As a result of this policy, the numbers of routes with more than
two competitors increased by 320 percent between 1992 (before full
liberalization) and 2008. During that period the EU saw the emergence of
According to the European Commission, Mobility and
Transport, Open Skies attributed “the expansion in the number of airlines,
higher employment levels in aviation, increased travel, more cities served (and
competed for), and low fares to the removal of barriers to
Asia also benefited greatly from the liberalization of its
After Malaysia and Thailand signed a liberalized
agreement, the market expanded for both countries by 37% and created more than
Israel will similarly greatly benefit from the Open Skies
agreement and it should be extended further to cover flights to and from the
United States and Asia. The agreement is also important as a symbol of the
setting of national priorities.
Israelis now have a unique opportunity to
adopt liberalization reforms in many economic sectors. The next step should be
to reform all government companies: the port authority, railways, electric
company, water company, and so on. These monopolies pay unreasonable salaries to
their workers, have comparatively low productivity and continue to milk the
majority of Israelis.
Opposition from the powerful minority of Israelis
enjoying the benefits of being government or government-supported monopolies
will be strong and the unions will not hesitate to make our lives miserable in
order to maintain their members’ privileges. But it might be worth it for the
government and vast majority of Israelis to ride out a few strikes, not cave in
and then reap the benefits of the reforms.The writer is the Director of
the Jerusalem Institute for Market Studies.
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