Arkia Airlines, whose parent company, Knafaim-Arkia Holdings (TASE:KNFM), has acquired El Al (TASE:ELAL) shares and options enabling it to achieve control of the airline, notified the High Court of Justice today that it wants to pursue its petition against the government. The purpose is to allow the publication of a tender to determine the designated carriers on all regular routes to and from Israel.
The announcement was made during a High Court of Justice hearing on the petition filed by Arkia Airlines and Israir against a decision by the social and economic cabinet from May 2003 to extend El Al's dominant position as Israel's national carrier for more years, with all that implies.
Arkia and Israir have asked to replace El Al as designated carriers on short-haul routes, to destinations where El Al carries less than half the traffic on the route, to destinations to which more than one designated carrier can be named, and to destinations for which a designated carrier has not yet been named.
In response to the petition, the state's attorney, Adv. Avraham (Avi) Licht, said the decision allowed El Al to temporarily hold onto its dominant position on regular flights, due to the public interests, especially ensuring an air link with Israel and preserving stability in the industry.
The hearing was held before Judge Aharon Barak, Judge Dalia Dorner, and Judge Theodore Or. Judge Dorner asked what was Arkia's interest in pursuing the case. Arkia's attorney Adv. Zvi Agmon said Arkia was maintaining its position that the cabinet decision should be reversed and the earlier decision on the matter restored.
Agmon said that while Arkia had options that would give it the controlling interest in El Al if exercised, "it is still not possible to know how matters will turn out." Arkia therefore insisted that the petition be heard.
Meanwhile, Antitrust Authority director general Dror Strum is currently examining whether to declare the routes on which El Al has exclusivity through code-sharing agreements as monopolies. He said, These agreements create monopolistic conditions."
Strum previously called the sale of El Al while it was still a monopoly as "a decision verging on illegality". He said the state decision to maintain El Al's dominance in order to raise the price of the airline for its privatization, was "at the public's expense and against the public interest in increasing competition."
Strum said the state was the loser since it failed to win the price for El Al as a monopoly on one hand, and harmed competition on the other.
Strum opposes the state's position, as presented to the High Court of Justice, that preserving El Al's hegemony is in the public interest. The state did not comment on Strum's position in its response to the High Court of Justice.
Published by Globes [online] - www.globes.co.il - on February 9, 2004