El Al Israel Airlines (TASE: ELAL) today notified the Tel Aviv Stock Exchange that the government’s conditions for allowing another airline to conduct regular flights between Tel Aviv and New York had not been fulfilled. The Tel Aviv-New York route is an important source of profit for El Al.
El Al’s announcement followed press reports that Minister of Transport Meir Sheetrit was considering making Israir, controlled by Nochi Dankner, a designated carrier on the Tel Aviv-New York route. El Al noted that the Israel Securities Authority had for its response to the issue.
El Al is currently the only designated Israeli carrier on the route, which entitles it to conduct regular flights. Israir, which runs charter flights on the route, has a very small share of this market. Continental Airlines (NYSE: CAL) conducts regular flights between Tel Aviv and Newark, New Jersey.
El Al said, “The minister of transport is considering the request, even though the quantitative conditions for choosing another designated carrier on the route have not been met in the volume of air passenger traffic to and from Israel, and in El Al’s share of the number of regular passengers on the route. These requirements were set in a decision by the ministerial social and economic affairs committee dated May 19, 2003.”
The ministerial committee decided that the minister of transport could add a designated carrier to regular routes only if El Al’s market share on the route fell below 30%. El Al’s market share is much higher.
The ministerial committee also decided that the minister of transport could eliminate the status of designated carrier only if activity by the Israeli company on a given route fell below 20%.
A confrontation took place this week between El Al controlling shareholder Knafaim-Arkia Holdings (TASE: KNFM) on the one hand, and Sheetrit and Israir on the other. Among other things, Knafaim shareholder Oded (Dedi) Borovich asserted that Sheetrit had tried to force Knafaim to sell Arkia Airlines to Israir. Sheetrit and Israir denied the assertion.
Published by Globes [online], Israel business news - www.globes.co.il - on March 31, 2005