Your money in 2019, part 3: Eilat, cannabis, fraud

Eilat Photo: ASAP Shutterstock
Eilat Photo: ASAP Shutterstock

Israelis pay NIS 700 for a return flight to Eilat. But with the new airport 19 kilometers from Eilat and Sde Dov to be closed, flying will be less attractive.

After quite a few delays and six years of construction, Ilan and Assaf Rimon Airport near Eilat is scheduled to open in early 2019. Will this be a game-changer in Israeli civil aviation? It depends on whom you ask. The airport is meant to gradually replace the airport in the center of Eilat and Ovda Airport, which is used mainly for international flights aimed at increasing tourism to Eilat during the winter. This goal, which was adopted by the Ministry of Tourism, is currently being achieved through 50 weekly flights from various destinations in Europe. These flights will be channeled to the new airport.

When the airport was under construction, Minister of Transport Yisrael Katz ordered that the landing and takeoff runways be lengthened from 3.1 kilometers to 3.6 kilometers and airplane parking facilities be increased in order to adapt it to large airliners. There were two reasons for this. The first was in order to facilitate emergency landings at Ramon Airport as an alternative to Ben Gurion Airport if necessary. The second was that lengthening the runways would also facilitate commercial flights by wide-bodied aircraft from distant destinations. Ramon Airport's annual capacity is two million passengers; in contrast to Ben Gurion Airport, flying hours at Ramon Airport are not restricted by the presence of nearby residents.

The considerable number of foreign airlines that currently conduct flights to Eilat are not confined to low-cost airlines; they include Lufthansa and Air Europa. These airlines receive a subsidy of €60 per passenger, an important incentive that brings tens of thousands of tourists to Eilat. Airlines flying to Ramon Airport will also receive a three-year exemption from airport taxes.

In addition to important international activity, Israeli airlines carrying domestic tourists to Eilat, the vast majority of tourist activity in the town, will also land at Ramon Airport. Passenger traffic on internal flights totaled 1.4 million in 2018. Israir Airlines and Tourism Ltd. and Arkia Airlines Ltd. operate flights to Eilat from Sde Dov Airport, Haifa Airport and Ben Gurion Airport. The price of tickets to Eilat is higher than that paid by tourists to Eilat from Europe, but an Israeli tourist, who pays over NIS 350 in each direction, is willing to do so for reasons of convenience - a flight directly from central Israel to the center of Eilat. When airplanes start landing at Ramon Airport, this will become less convenient - the distance from Ramon Airport to Eilat is 19 kilometers.

In considering a flight from central Israel to Eilat, however, note should be taken of the other end of the flight. If Sde Dov Airport is closed down in July 2019 in accordance with the most recent cabinet decision in the matter, the effect on internal flights will be dramatic. Sde Dov accounts for most internal flight activity to Eilat. Its closure will cause an estimated 30% reduction in flight traffic to Eilat from central Israel, according to a report prepared by the Eilat Hotel Association. The report also warns that fewer passengers to Eilat is liable to cause a reduction in the number of flights, resulting in an increase in ticket prices.

Bottom line: The new airport's viability will also affect the price.

Cannabis market: Growers racing to meet the standards

2019 will be a critical year for the entire cannabis industry and a number of companies in it. The new cannabis report is scheduled to become the only set of regulations governing the growing, production, distribution, and marketing of cannabis in Israel at the end of March 2019. This means that anyone not growing, producing, or marketing cannabis in compliance with the reform's standards at that time will be unable to grow cannabis for the Israeli market, and will not even be able to touch a cannabis plant, even for experimental purposes, because the plant will become illegal for them.

A number of the companies currently growing and marketing cannabis according to the old standards have not yet shown that they meet the new standards. Tikun Olam, the largest company in the Israeli medical cannabis sector, which also has profitable overseas business, is one of these. Tikun Olam is working full speed to meet the standard on time, and will probably succeed, but a risk nevertheless exists. The Better Cannabis and Pharmocann companies, which are planning mergers into stock exchange shells have also not yet proven that they meet the new standards.

In addition to the reform, statements by a number of cannabis companies listed on the Tel Aviv Stock Exchange (TASE) that projected large initial revenue in 2019, despite having no commercial activity at all so far, will be tested.

Exports will again be a matter for a decision by the prime minister in 2019 - perhaps more than once. If exports are approved, it will probably happen in 2019. If it does not happen then, it will probably never happen under the current leadership. In any case, if exports are not approved in 2019, the international arena will be so competitive that cannabis exports will not be on a nationally important scale.

2019 will also be a turning point for the medical cannabis consumer. Those purchasing cannabis directly from the countries currently producing it will no longer be able to do so; they will have to buy it from pharmacies, or from pharmacy-like pharmacies set up by the companies, which will also have to meet the new standard. Cannabis will be sold under the brand name of the marketing companies, according to concentrations of active ingredients, not according to the cannabis specie. Up until now, cannabis has been sold at a fixed price of NIS 390, but the price will now be linked to the quantity. Those consuming less cannabis will pay less, while those consuming large quantities will pay more. Adding medical cannabis to the National List of Reimbursed Drugs will not be discussed at least until the next year. Linking the price to the quantity is designed to avoid people giving cannabis to others; up until now, many customers bought more cannabis than they needed in order to give or sell it to friends.

The Israeli market is waiting for full legalization of cannabis for enjoyment purposes, but the fate of such legislation is very unsure at present. A petition to the High Court of Justice is being prepared, and the final word about this has yet to be spoken.

Bottom line: partial solutions on the issue will arrive only in March 2019.

Online fraud: The plan that will protect senior citizens

Ugly cases of merciless sales representatives pressuring senior citizens to spend thousands of shekels on products in telephone calls have been taking place for years. The methods have been perfected, the testimonies are painful, and the issue even reaches the headlines from time to time. The swindlers change (or change the name of their company), but things continue in the same way. It appears, however, that 2019 will bring a change. A recently approved comprehensive plan is scheduled to get underway in 2019, and it is hoped that it will put an end this abuse of the elderly.

The plan contains a series of clauses designed to deter swindlers. The punishment for criminals has been increased to 3-5 years. Fines will now include personal sanctions for corporate officeholders. Positions and funding for enforcement have been stepped up. Perhaps the most important clause is the one requiring the credit company to take an active role in the deal, and to require companies to halt payments to other companies for what the Israel Consumer Protection and Fair Trade Authority defines as "questionable transactions."

The spirit of change is also being translated into deeds. 12 suspects were arrested this week on suspicion of abusing senior citizens, including company owners and managers, and also the telephone receptionists making the calls. A month ago, the Consumer Protection and Fair Trade Authority fined a company named Big Sale NIS 5.3 million for defrauding senior citizens. The Knesset Economic Affairs Committee discussed the issue this week; dozens of packages of products pushed on senior citizens were brought to the session. Figures were presented during the discussion showing that 120 marketing companies defrauded and abused senior citizens, cheating them of an average of NIS 85,000 per victim.

Bottom line: Since the issue is a painful one that affects all of us, we will merely express our hope that the authorities succeed in implementing the program.

Published by Globes, Israel business news - - on January 3, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

Eilat Photo: ASAP Shutterstock
Eilat Photo: ASAP Shutterstock
Dubi Ben-Gedalyahu, Sonia Gorodeisky, Guy Lieberman, and Chen Ma'anit
Ela Levi-Weinrib, Amiram Barkat, and Yuval Azulai
Twitter Facebook Linkedin RSS Newsletters גלובס Israel Business Conference 2018