Mofaz tries again to 'open the skies'

Transportation Minister looks to bring low-cost carriers into the market.

el al ben gurion 88 298 (photo credit: Ariel Jerozolimski)
el al ben gurion 88 298
(photo credit: Ariel Jerozolimski)
In yet another attempt to implement an "open skies" policy, the Transportation Ministry said Thursday it will present the government with a reform plan aimed at boosting competition, allowing the entry of new carriers into the Israeli market and lowering airfares. "Israel's true interest is to create competition between the Israeli companies to give them the possibility to compete with each other as well as bring down ticket prices. Then Israelis will benefit, and those companies will grow as well," Transportation Minister aid Shaul Mofaz said at a press conference in Tel Aviv on Thursday laying out the main conclusions of the ministry's committee for the implementation of an open sky policy. "The one obstacle that is hampering 'true' competition for Israeli carriers is the additional annual security cost of $100 million, which they have to bear so we demand that the government fully subsidize the cost so Israeli airlines are in a position to handle an extended open sky policy." Until now, he noted, the government has been subsidizing $50m. The open skies policy, which sets the capacity and frequency boundaries to which airlines can fly to the country, has been a controversial subject in recent years following the privatization of El Al. Last year, Mofaz appointed a nine-member committee headed by Transportation Ministry Director-General Gidon Siterman and including Tourism Minister Director-General Nahum Itzkovich and Finance Ministry Budget Chief Koby Haber, to assess the open-skies policy and make recommendations on its implementation in the framework of Israel's aviation policy. The committee replaced a task force set up in May 2005 that gave the Finance and Tourism Ministries more say in the matter. That committee, which never met, was a child of then-tourism minister Avraham Hirchson, who was very vocal about "opening the skies" to competition. The committee's recommendations, which will be presented to the government for approval over the next few weeks, mean to threaten the agreements El Al Israel Airlines had forged on the eve of its privatization giving the national carrier the sole right to operate scheduled services as the nation's designated carrier. "Full government subsidy of the security costs borne by Israeli carriers would also question anew the agreement El Al enjoys providing the carrier with exclusivity on certain routes," said Siterman, chairman of the committee. Responding to the recommendations of the committee, El Al said it has always been in favor of open skies insofar as the rules of fair and equal competition between all carriers operating to and from Israel are maintained. Mofaz added that the committee's recommendations also seek to encourage the entry of low-cost airlines into the market by opening Terminal 1 at Ben-Gurion Airport for low-cost flights during all times of the day and night. Furthermore, the committee recommended that services fees such as landing fees, which low-cost airlines would be charged by the airport should be lower than those being charged from the scheduled carriers. Foreign scheduled carriers such as Lufthansa or British Airways are charged between $400,000 and $500,000 a month in airport fees. "In recent months we have been in talks with three low-cost carriers including Easyjet, Ryanair and Air Europe, in an effort to understand their needs and conditions for flying to Israel," said Siterman. Market experts, however, were skeptical about the economic viability of low-cost airlines operating in Israel. "Low-cost carriers operate according to a very clear business model: short-haul flights of less than four hours, low landing costs using periphery airports, which Israel does not offer," said one industry source.