Rival Israeli airline Israir sued El Al Israel Airlines (TASE:ELAL) in the Tel Aviv District Court today for NIS 8 million, alleging that El Al had abused its monopolistic power on the Tel Aviv-New York route, and thereby damaged Israir. Israel seeks a declaration that El Al abused its status in a way that reduced competition and harmed the public.
In the period July to October this year, Israir operated flights between Tel Aviv and New York. It claims that El Al sought to prevent its entry into this market, chiefly through aggressive price reductions, in breach of antitrust law. According to Israir, this was a continuation of the ruthless policy El Al has conducted for years against any competition on its most important route.
Israir said that, because of these actions by El Al, it ceased operations on the New York route after just three months and a loss of NIS 8 million. A week after it started operating the route, El Al's prices sank to $350, compared with $800-1,200 during the summer months in previous years.
According to Israir, the reason for the price reduction was El Al's desire to cause it severe damage, which would dissuade it from continuing to operate the route and prevent further competition. Because of this step by El Al, Israir was forced to charge similarly low fares, or even lower ones. Israir claims that, as soon as it ceased to operate the route, El Al's fares rose again to their former level.
El Al's legal counsel rejected out of hand Israir's claims of abuse of monopoly power by El Al, and denied that El Al had a monopoly on any route, saying it was well known that El Al faced daily competition with some 100 international airlines on the routes to and from Israel.
El Al has yet to receive the statement of claim, and no statement of defense has been filed.
Published by Globes [online] - www.globes.co.il - on December 8, 2004