Following the failure of the Ben Gurion Airport taxi tender, the Israel Airports Authority (IAA) is conducting negotiations likely to culminate in virtual cab company Gett being granted the exclusive right to operate a taxi service at Ben Gurion Airport, apparently without a tender. If the parties reach agreement by Sunday evening, the IAA announcement that Ben Gurion Airport will be open to all taxis from Monday will become irrelevant.
Among other things, reaching and signing an agreement with Gett depends on the discount rate offered by the company in return for exclusivity at the airport. This assumption is the justification for going ahead with an agreement, because it is meant to be better for passengers than full competition, which does not include discounts on the fare tariff. Hadar-Lod's franchise at Ben Gurion airport expires on Monday, and was to have been replaced by a franchise agreement with it in cooperation with Gett. Hadar-Lod and Gett made a joint bid in the tender with an offer of a 31% discount on the Ministry of Transport fare tariff. For example, with this discount, the price of a ride from Ben Gurion Airport to Tel Aviv during the day would fall from NIS 129 to NIS 89 (plus the usual extra costs at Ben Gurion Airport, such as for luggage and three or more passengers - there is no discount on these added charges, which are calculated according to the Ministry of Transport rate).
The Hadar-Lod taxi drivers complained about the new proposed discount, saying that they would lose money at the new rates, leading to the collapse of the tender. Gett drivers who were to have worked at Ben Gurion Airport were also dissatisfied. Hadar-Lod asked for a month's extension in order reach understandings with its drivers and with Gett, but the request was immediately turned down, and the IAA therefore announced today that Ben Gurion Airport would be open to all legally registered taxis. Hadar-Lod claimed that the reason for the crisis was Gett's retraction of a commitment to provide compensation for most of the drivers' lost income.
Sources inform "Globes" that Hadar-Lod's management left the task of preparing the bid to Gett, which holds 51% of the partnership, without verifying that the discount offered by the company was reasonable. Gett asserted this week that the discount was economically justified, because its app would increase the number of the drivers' fares on their way back to the airport.
On Tuesday, the Antitrust Authority questioned chairman Yehuda Bar Or and other Israel Taxi Drivers Association officeholders on suspicion of encouraging an agreement in restraint of trade by calling on taxi drivers to refuse to apply the new fare tariff by charging only according to the official tariff. It now turns out that the IAA itself filed the complaint with the Antitrust Authority. The IAA believes that the events are enabling it to cancel the tender results and to sign a direct agreement with Gett, even though such an agreement is likely to encounter legal opposition. A source associated with the Hadar-Lod taxi stand at Ben Gurion Airport claimed today that it was not surprised by the new development, adding, "The tender was tailored to Gett from the beginning."
Another scenario is that the impending Monday deadline for termination of Hadar-Lod's franchise, and the possibility of Gett receiving an exclusive franchise for Ben Gurion Airport will pressure Hadar-Lod into reaching agreements along the lines of the tender won by the two companies, possibly at a discount closer to 20% than the 31% discount offered in the tender.
The IAA said today that following its announcement that Ben Gurion Airport would be completely open to all taxis, it had received many calls from taxi stations welcoming the measure. The main reason is that as a result of the exclusivity enjoyed by Hadar-Lod, 40% of the taxis taking passengers to Ben Gurion Airport leave the airport without passengers. For its part, Hadar-Lod has in recent years offered a 30% discount on fares to the airport in order to provide drivers with work on their way back to the airport after dropping off their passengers. It can now be assumed that the consumers will lose these cheap rates.
The tender issued by the IAA in late March changed the previous competition over the franchise fee (Hadar-Lod paid NIS 6 million a year) into competition over the discount offered for passengers. The franchise fees were converted into a payment of NIS 5.80 for each taxicab leaving Ben Gurion Airport with passengers, a fee that could not be rolled over onto the passengers. A payment of NIS 5 more for every exit included in the rate for the trip was retained.
Passenger traffic at Ben Gurion Airport is projected to reach an unprecedented 4.5 million this summer. Increased traffic is also expected next week with the Shavuot holiday, with 65,000 passengers going through the airport. Taxi traffic leaving Ben Gurion Airport currently totals 1.1 million trips a year, and is expected to rise with the increase in passenger traffic among both Israelis and foreign tourists. According to today's announcement by the IAA, starting on Monday, passengers will enjoy free buses at peak times and when there is a shortage of taxis, mainly for trips to Tel Aviv and Jerusalem. It is not clear whether this system will be operated if an agreement is reached with Gett.
The IAA said in response, "Every possible option is being considered as part of our preparations for Monday." Gett chose not to respond.
Published by Globes [online], Israel Business News - www.globes-online.com - on May 25, 2017
© Copyright of Globes Publisher Itonut (1983) Ltd. 2017