Arkia Airlines Ltd. has accused El Al Israel Airlines Ltd. (TASE: ELAL) of being responsible for the risk of cancellation of flights to and from Israel in the summer 2018 schedule, because of a manpower shortage. In a letter to Ministry of Finance director general Shai Babad, Arkia CEO Nir Dagan writes, "The time has come to remove from El Al the monopoly on security services… in the light of El Al's management failure and the discriminatory practices it has used against its competitors for years."
Last Thursday, outgoing El Al CEO David Maimon made an urgent appeal to Ministry of Foreign Affairs director general Yuval Rotem detailing the manpower problem in the security division, because of which hundreds of flights are liable to be cancelled. In his letter, Maimon demands immediate finance for 200 job slots for additional security personnel.
El Al is in charge of security for the three Israeli airlines that operate overseas flights. The problem relates to new routes and to expanded services on existing routes, and casts a shadow over the upcoming Passover holiday and the airlines' planned schedules. Arkia and Israir are the main casualties of the uncertainty, but El Al subsidiary Sun D'Or is also in the same situation.
"Israeli airlines are required to obtain approval from El Al, their main competitor, before every flight, and to reveal to El Al their business plans," Dagan writes. "El Al exploits this situation to its advantage, and appears to take commercial considerations into account in allocating its services."
It is no coincidence that Dagan's sharp words come after the publication of the report setting out the reasons for the Antitrust Authority's opposition to the proposed merger between El Al and Israir. In the report, Deputy Antitrust Commissioner Adv. Uri Schwartz states that the merger would harm competition among other things because security for Israeli airlines is in El Al's hands, and if merged with Israir, El Al might discriminate against Arkia.
"This is an abnormal situation that should disappear," Dagan continues in his letter. "This is particularly so given El Al's protracted failure in administering the service, a failure to which it openly admits in the aforementioned letter (Maimon's letter to the Ministry of Foreign Affairs - M.R.C.)." Dagan accuses El Al of having known of the supposed crisis for a long time and of having chosen not to take action.
El Al stated in response, "The CEO of Arkia has unfortunately decided to cross all the red lines and to exploit in a mendacious and ugly way a situation that does not depend on El Al. Arkia's CEO also forgets to mention that the problem to which he refers began a long time before the decision by the Deputy Antitrust Commissioner not to approve the acquisition of Israir, a decision that first and foremost serves the interests of Arkia, which enjoys, and as a result of the decision will continued to enjoy, a monopoly on flights on the Eilat route at the expense of the Israeli consumer.
"We find regrettable the manipulation employed by the CEO of Arkia, who instead of acting together towards the joint goal of solving the problem, which affects all Israeli airlines, chooses to mislead government officials and the public with groundless claims. In response to the false claims presented in the letter, El Al intends to react with all the means at its disposal, including the possibility of a slander suit against Arkia and its management."
Arkia's demand that security should be taken out of El Al's hands has considerable economic implications. El Al's security division has been responsible for security for Arkia and Israir for many years, and earns on these services accordingly.
At the end of 2018, the government is due to consider whether to remove security services form El Al and set up a separate authority to be responsible for them.
Published by Globes [online], Israel business news - www.globes-online.com - on February 5, 2018
© Copyright of Globes Publisher Itonut (1983) Ltd. 2018