Open skies bring lower fares

Ryanair

Air fares to Western Europe have fallen 15% since the Open Skies agreement with the EU was signed.

Five years after the signing of an Open Skies airline competition agreement with the EU, Minister of Transport Yisrael Katz held a press conference in which he outlined the measures he was planning. The emphasis will be on enhancing competition, among other things on flights inside Israel. Foreign companies will operate flights to Eilat, and will be encouraged to step up their business in Israel by establishing hubs at Israel's airports. The first sign of this will apparently be Irish low-cost airline Ryanair, which recently announced its first route from Ben Gurion Airport. Starting in March, Ryanair will operate direct flights to Paphos in Cyprus for only €39 in each direction.

In the framework of the open skies agreement with the European Union (EU), it was agreed that in the first five years of the agreement, foreign airlines would not be allowed to establish hubs in Israel. Katz, however, is now encouraging them to do so. At the same time, in order to encourage foreign airlines to fly to Israel, a three-year exemption from fees amounting to $3,000 per flight at Ramon and Haifa Airports will be granted, for Boeing 737 airliners, for example. This exemption is already being granted for Ovda Airport, and Katz now plans to extend it to Ramon and Haifa Airports. The fee includes parking fees for the airplanes, use of runways, etc.

"Insofar as it is possible to cancel fees in the coming years, as we did in Haifa, I'm in favor," Katz said. "The mayor of Haifa wanted to close down the airport, but I believe that large cities need an airport. It's a pity that Tel Aviv won't have its own airport. Flights now take off from Haifa to Cyprus, and there will soon also be flights to Romania.

"I'm glad that the Israeli companies have met the competitive challenge we posed to them. El Al Israel Airlines Ltd.'s (TASE: ELAL) business is booming, Israir Airlines and Tourism Ltd. has almost doubled its business and number of employees, and Arkia Airlines Ltd. is also growing. The Israeli companies mentioned the security problem to me as a problem in competition. I undertook that this question will not pose a problem, because the state will cover almost 100% of the cost of security. I take it upon myself to work with the Ministry of Finance and the security services to make sure that there is no restriction on the Israeli companies' activity in this aspect."

Since the open skies policy was instituted, the cost of flights has dropped by 18% to Western Europe, 15% to Eastern Europe, 3% to the Far East, and 14% to North America. There are now 110 foreign airlines active in Israel, and traffic has increased by 40% in passengers and 35% in international airliners. While, regular flights account for 89% of all flights, the activity of low-cost airlines has tripled.

Katz met today with senior Israel Airport Authority and Ben Gurion Airport executives for the purpose of making the agreement a "fully open agreement." He is stressing two points that will make this possible: the establishment of hubs in Israel by foreign airlines, and what he calls the "sixth freedom," aimed at allowing connecting flights for foreign airlines from Ben Gurion Airport to Eilat. This measure can boost tourism in Eilat, but its attractiveness also depends on the high overnight prices at hotels in the city.

Katz hopes that competition will reduce the prices of internal flights to Eilat; ironically, these flights are currently more expensive than overseas flights in certain cases - NIS 750 for a roundtrip ticket, compared with $180. Commenting on El Al's elimination of its route to Eilat, Katz said, "I fought to have this line approved," which he said lowered prices at the time and led to the upgrading of the competitors' airplanes. He added, however, "For its own reasons, El Al decided to discontinue the route, and prices rose."

Ending exhausting trips in Ben Gurion Airport

"I have been in my position for eight years, and I'm very satisfied with the decisions I made, from upgrading the runways to the control tower at Ben Gurion Airport. There were difficult struggles and criticism of the Airports Authority, which now has surpluses in the billions to pay for these upgrades. They also warned that the open skies policy would come crashing down on our heads, and I proved to everyone that the decisions made were good, and that developments have exceeded all the predictions. Fortunately, the low fuel prices also facilitated low ticket prices, but that's not the only reason why competition increased," Katz explained.

Also worthy of note is the long and exhausting trips of up to 10 kilometers within Ben Gurion Airport. Katz promised, "As part of the agreement with the Ministry of Finance, in cooperation with the Airports Authority and Netivei Israel - the National Transport Infrastructure Company, we will move forward with a plan to eliminate this problem. We'll invest more than NIS 1 billion in this. Ben Gurion Airport is the most crowded city in Israel. " Katz also mentioned opening the exclusive agreement at Ben Gurion Airport with the Hadar Taxi company, saying "I support a policy that favors the passengers ahead of the Airport Authority's profit." He noted the opening of a high-speed railway route from Ben Gurion Airport to Jerusalem, saying, "People will be able to buy airplane tickets combined with railway tickets, and reach Jerusalem within 20 minutes."

The Ministry of Tourism recently reported a record of 2.7 million incoming tourists in 2016, but Katz believes that this number represents a lost opportunity. "As a government minister, I want the state to set a target of 10 million tourists. This is a realistic goal that can easily be achieved. Had there been such a national plan, there would already have been 10 million tourists here," he declared.

Another pointed remark by Katz concerned tourism from China, a channel that the Minister of Tourism is avidly promoting as a consumer group with great potential. "The Chinese are coming, and in growing numbers, and I visit a hotel in the Galilee, and hear that there's no one to escort a group of Chinese staying there on a tour of the Galilee. This is a failure of tourist infrastructure. There's a direct connection between aviation, Israelis flying a lot more, and the opportunity to connect with the world and bring it to us," he said. Another project that drew criticism from Katz was the Ministry of Tourism's winter campaign to attract tourists to Eilat, a project that is growing every year, based on subsidies and grants for airlines operating direct flights to Eilat. "I believe in competition, not subsidies, by cutting fees, for example," Katz remarked.

Published by Globes [online], Israel Business News - www.globes-online.com - on January 25, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

5 Comments
View comments in rows
Update by email about comments talkback
POST
Comments
Twitter Facebook Linkedin RSS Newsletters גלובס Israel Business Conference 2018