The recent visit by US President Joe Biden was an opportunity for an enormous amount of goodwill to be generated. His kneeling at the Yad Vashem museum to speak to two Holocaust survivors was one of the visual highlights of his trip. The Jerusalem Declaration signed by the leaders of the United States and Israel strengthened once more the very special relationship between the two countries.
From Israel, Biden flew to Saudi Arabia, heralding the first time a civilian plane flew nonstop between the two countries.
Before leaving Israel, he praised Saudi Arabia’s historic decision to open its airspace to planes flying to and from Israel, calling it “an important step towards building a more integrated and stable Middle East region.”
Bold remarks indeed, if only the Saudis had actually released such a statement. What they did announce was that it would open its airspace to all carriers. The Saudi General Authority of Civil Aviation said the country’s airspace was now open to all carriers that meet its requirements for overflights, in line with international conventions that say there should be no discrimination between civil aircraft.
Although the Zionist entity, Israel, was not mentioned, the announcement of an open-skies policy by Riyadh will mean shorter flights from Asia to Israel, as airlines serving those routes will no longer be required to take long detours around Saudi Arabia en route to/from Israel. Israel and Saudi Arabia have no diplomatic relations, and the kingdom still does not recognize Israel as a state, which is the main reason the Saudi statement did not refer to Israel by name.
Behind the scenes, however, the two sides have been working together on security issues for some time, as both are concerned by the growing influence in the region of their common enemy Iran. For the last two years, throughout the pandemic, Israelis with foreign passports have been making the trek to Riyadh, usually changing planes in Dubai or Amman. Saudi Arabia has actually been allowing the use of its airspace for flights between Israel and the United Arab Emirates and Bahrain, since its two Gulf neighbors established diplomatic relations with Israel in 2020.
CLANDESTINE TRAVEL between Israel and Saudi Arabia has been primarily on two levels: commercial and governmental.
Commercial contacts have sprouted up throughout the two countries. Business leaders such as Sabah al-Binali, OurCrowd Arabia executive chairman, set the scene of a prosperous new era of free trade relations between the UAE and Israel. Embracing Saudi Arabia in this integration of the region is high on his agenda. The courtship between Israel and Saudi Arabia continues to grow, but Riyadh is still playing hard to get.
Government officials who have sent emissaries to the kingdom try to focus on security issues, which rarely are objected to by their Saudi counterparts, and yet the Palestinian issue is etched in their consciousness.
While not rivals in any sense of the world, their enmity over Iran does not yet overcome Saudi sensitivities to the Palestinian issue. While countries in the region spout the importance of the Palestinian struggles, with the Saudi leadership its commitment to a two-state solution runs deeper and still resonates in its diplomacy.
The change in tone in Saudi Arabia, once famous for its ultra-conservative brand of Islam and vociferously antisemitic school textbooks, has even percolated down to Saudi television. In one show, a Saudi man says the country should make peace with Israel, while describing the Palestinians as ungrateful.
On social media, which is tightly monitored by the authorities, some Saudi influencers regularly extol the benefits of peace with Israel. A decade or two ago, mention of peace with Israel would have drawn incredulity, if not outright hostility, from Saudis. That has changed, especially with the widespread perception that Iran has long replaced Israel as the country’s nemesis.
EARLIER THIS week, El Al made a formal request to the Saudis requesting to fly over Saudi Arabia on its flights to Bangkok. Unofficial sources state it will take two weeks to get a response. Arkia, too, has asked for a similar overfly on its flights to Goa, India. Yes, we are all cognizant of the saying the proof is in the pudding; in this case, the proof is in the permission.
There is no reason to fear it won’t be granted. Israeli airlines should start to benefit from the shorter flight times and fuel savings. That, though, is the tip of iceberg.
Tourism Minister Yoel Razvozov announced this week he will soon be flying to Japan and the Philippines. His purpose is to entice both countries to begin planning nonstop flights to Israel. It’s been in the pipeline for the past few years, but was put on the back burner due to the pandemic.
El Al, while canceling flights to Toronto this fall, envisions flights to the Far East as exotic destinations where it can expand its client base. As of now, any flights to either country would entail flying north and then veering due east to Japan or southeast to the Philippines. Once the Saudis approve a flyover, Israeli planes could fly south over Saudi Arabia and past India to get to either of the countries.
Will flights become cheaper?
Consumers should understand that while the flight times will be dramatically reduced – anywhere from two to five hours, depending on the distance – the price of the ticket will not be determined by how long the flight is.
The price of a ticket is determined first and foremost by basic economics, little of which consists of the actual cost of flying the plane.
Competition on an airline route takes first priority in setting a price. Of course, taxes and airport fees, the price of food and checking a bag all go into an airline setting the price. Jet fuel price in the stratosphere? The consumer will pay. Inflation has pushed labor costs to new heights? The consumer will pay. Another airline flying the same route charging a specific amount? You can bet your bottom dollar that the new kid on the block will price his flight accordingly. Some airlines introduce a new route with rock-bottom fares. Their competitors are forced to match the fare almost instantaneously or risk their clientele switching airlines.
PLEASE DON’T be suckered into believing that the Israeli airlines will suddenly drop their fares to India or Thailand. In fact, with little direct competition, most of the savings on the fuel will go into the airline’s pockets. Which is fine. Whenever you look at a route with no competition, the fares will be quite high.
Take India, for example. El Al had the country to itself for years; nobody was flying nonstop to Mumbai or Delhi. You could fly via Istanbul or Amman, and thousands did, as the El Al fares were absurdly high. Business clients who used to fly Sunday through Thursday paid over $1,500 in economy class.
Once Air India started flying to Delhi, over Saudi Arabia, its fare started at $400. Even today, Air India’s economy class fare to Delhi starts at $690. El AL was forced to match the fares.
Longtime clients were incensed that for years they were forced to pay such astronomical sums. Travel forums popped up asking if they could file suit over the brazen airfares.
The answer is, of course, a resounding no. Airlines can set in most countries whatever fare they so choose. The days when a government could set airline fares is ancient history. Clients who bemoan high fares on a specific airline simply boycott that airline and fly with another carrier, even if that means adding hours and a stop along the way. In fact, like El Al’s decision to cease flying to Toronto, there is a real fear that El Al will not return to Mumbai.
Fare elasticity is used by all airlines. In business, fare elasticity refers to the degree to which individuals change their demand in response to price changes. An airline ticket’s price elasticity of demand is a measure of how sensitive the flight demanded is to its price. When the price rises, demand falls for many destinations, but it falls more for some than for others. Fare elasticities vary across socioeconomic groups.
Airlines this summer have raised fares to rates never seen before. The increase did not see a relevant reduction in demand though. People paid sums that were unheard of just a few years ago. Rationalizing that real costs have increased, only a small percentage elected not to fly. So, when real costs drop and demand subsides, one will see a drop in the price of tickets. It will not, though, be a dollar-for-dollar drop.
The real news of the Saudi and Israeli announcements is more to see whether we can titillate additional airlines to fly to Israel. Nothing will happen this year; airlines and airports are cutting capacity throughout the world. They simply don’t have the manpower to handle the huge increase in demand for flights.
Consumers should see lower fares in 2023. Short of another war, inflationary pressures will result in a reduction in both leisure and business travel. We have already seen a decrease in the price of fuel, and this pattern should continue. More competition equals less demand among the flying public. If one has a dozen airlines flying to the Far East, then the oversupply will result in airfares going down.
Can we entice Singapore Air to fly to Israel? We know that its government, like Japan, has upped its investments here. The Israeli Tourism Ministry has strong data to back up its claim: open up your country with direct flights, and Israelis will flock there in numbers impossible to fathom. One need only look at the UAE and Morocco to see what nonstop flights did to the math. For the Israeli airlines being allowed to fly over Saudi Arabia, this will bring some strong financial savings to them. But it will quickly be dwarfed once the Chinese carriers return. Add in new airlines flying to Israel, and the forecast for El Al is still cloudy.
Finally, Israelis wishing to visit Riyadh or Jeddah should be very patient. The Saudi Pavilion at the recently closed World Expo in Dubai was one of the most popular places in the entire expo. Opening up their country to tourism resulted in an enticing and entertaining exhibit. For many Israelis fortunate to visit the expo, they saw a glimpse into a country with a rich and varied history. For now, only a few will end up traveling to Saudi Arabia, but thousands more will soon be looking down at the kingdom from 30,000 feet.
So while flying over Saudi Arabia will save time, never forget that while in the West we say “time is money,” in Saudi Arabia the same proverb is translated as “time is gold.”
The writer is the CEO of Ziontours, Jerusalem, and a director at Diesenhaus. For questions and comments email him at [email protected] •