After years of talks, political lobbying, and threats of strikes, the cabinet today approved the open skies agreement with the EU. The threatened strike by Israel's three airlines - El Al Israel Airlines Ltd. (TASE: ELAL), Arkia Airlines Ltd., and Israir Airlines and Tourism Ltd. - also materialized, with all flights grounded at 5 am, but failed to dissuade the government.
The agreement will open Israel to all European airlines without restriction on the number of flights or quotas. The agreement is intended to liberalize civil aviation between Israel and Europe. The parties hope that it will result in lower fares between Israel and Europe, open new destinations in Europe, and bring in more tourists.
Opponents of the agreement argue that it does not protect Israeli airlines, or help them create an equitable starting point to compete against European airlines, which, for example, do not have the high security costs of Israeli carriers. The opponents also claim that the agreement will lower fares by only a little, if at all, because commercial carriers can go only so low.
Passenger traffic between Israel and EU states accounts for 60% of the traffic on scheduled international flights to and from Israel.
The Ministry of Transport and Ministry of Finance, which negotiated the open skies agreement, say that it will be implemented gradually over five years in order to give Israeli airlines time to prepare for the new competitive structure in the aviation industry and provide them some protection during the interim. Under the agreement, each year, seven new destinations in Europe will be added to flights from Israel, and Israeli airlines will be exempt from the requirement to submit code-sharing agreements to the Antitrust Authority, as they are currently required to do.
Published by Globes [online], Israel business news - www.globes-online.com - on April 21, 2013
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