"The new Arkia Express service is our answer to competition on the Eilat route. Our prices will be competitive even to bus fares to the southern town," declared Arkia Airlines Ltd. CEO Gadi Tepper in his first interview since taking up his post two years ago.
Ever since Minister of Transport Israel Katz announced several months ago that he intended to allow El Al Israel Airlines Ltd. (TASE: ELAL) to make low-cost domestic flights to Eilat in order to boost competition on the route, relations between Israel's carriers have been stormy.
Arkia dominates the route with a 70% market share, and Israir Airlines and Tourism Ltd. carries the rest. The two airlines slammed Katz's decision, on the grounds that so long as international routes were not open to full competition, El Al should not be allowed to compete on domestic routes. Arkia and Israir said that the decision would result in their financial collapse.
El Al, for its part, said that it intended to cut fares to Eilat by 30-40%, a huge discount considering that the average one-way fare between Eilat and Ben Gurion Airport is currently NIS 250. Fares can reach NIS 370 during peak times.
Arkia and Israir petitioned the High Court of Justice against Katz's decision, but even before the court hears the case, Arkia has decided to change the rules of the game by shortly launching the Arkia Express service on January 1, the first domestic flight service of its kind in Israel.
Arkia Express will operate on the Ben Gurion Airport-Eilat route. Arkia will offer 500 seats a day on two designated flights at one-way fares starting at NIS 99 for reservations made online at least six weeks in advance. In line with the practice at low-cost services around the world, as demand rises and as the flight date gets nearer, the price will rise.
Arkia Express tickets will be sold online. No meals or beverages will be offered on the flights, although they can be purchased by passengers. No cancellations or date changes will be allowed, in accordance with the provisions of the law. Luggage will cost an additional NIS 25 per suitcase, or NIS 20 if luggage is included in the online reservation. Arkia will charge NIS 10 each way for a reservation made by telephone.
Flights will take off and land during off-peak hours.
"Globes": So the consumer will in fact benefit from threat you sense from El Al's entry on to the route. Maybe the minister of transport was right?
Tepper: "There's no connection between the issues. We prepared this product months ago, before the decision about El Al. We couldn’t carry it out until now because of our fleet's work plan. Between the time we started to think about the plan and since we decided to move forward with it, we've bought two more planes, which will mainly operate the new service. These planes gave us the push we needed to begin marketing Arkia Express ahead of the first flight scheduled for January 1.
"Our argument against El Al is that the decision to allow it to fly this route was made without taking into account that the Israel Civil Aviation Authority rejected their similar request only a few months previously on the grounds that there was no room for another carrier."
Once Arkia was synonymous with flights to Eilat, but in the past two years, since Tepper took up his post, the airline has taken to the international skies. In the past few months, the airline has seized opportunities to inaugurate services that hitherto were the exclusive domain of El Al. For example, Arkia won a tender to fly the prime minister and his entourage to the US, after underbidding El Al by $1 million.
Last week, Arkia announced an agreement with the Jewish Agency to carry new immigrants to Israel from cities served by the airline. A few weeks ago, the airline inaugurated a route to Ukraine. It obtained a permit after an arduous struggle with the authorities.
"We're fighting for routes, and we're trying to obtain permits as designated carriers to many destinations in order to diversify, while at the same time we keep our finger on the pulse and try to respond as quickly as possible to the market," said Tepper.
Published by Globes [online], Israel business news - www.globes-online.com - on December 3, 2009
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