Tourism Ministry pays airlines NIS 50m for new routes

Wizz Air  plane photo: Shutterstock

Airlines received €1.25 million in grants for new routes from China in 2017-2018, fewer tourists visited Israel from China in 2018 than in 2017.

Foreign airlines have received grants totaling over NIS 50 million for operating routes from various destinations, starting in 2016.

The Ministry of Tourism is responsible for the grants under the policy of Minister of Tourism Yariv Levin, who will probably not retain his position in the next government. The grants are awarded to airlines for opening new routes to and from Israel when the ministry believes have potential for bringing tourists to Israel. The airlines receiving the grants at the end of the first year of their activity undertake to use the money for marketing measures and campaigns to encourage tourism to Israel.

Airlines receive €250,000 for a route per weekly flight for a year, meaning that an airline operating three new weekly flights gets €750,000 a year. Since one of the conditions for the grant is opening a new route that did not previously exist in Israeli aviation, the main beneficiaries from the grants are low-cost airlines beginning flights from less popular destinations, which are cheaper to operate, including lower airport fees charged by the Civil Aviation Authority of Israel.

Heading the list of the airlines receiving Ministry of Tourism grants since 2016 is Hungarian airline Wizz Air, which has received €3.3 million, over half of all the grants obtained by airlines. It received the grants for operating flights between Tel Aviv and Lublin (Poland); Kosice (Slovakia); Craiova, Timisoara, and Sibiu (Romania); and Debrecen (Hungary).

Irish low-cost airline Ryanair has received €2.5 for operating flights between Ben Gurion Airport and Poznan, Wroclaw, and Gdansk (Poland) and Baden-Baden and Memmingen (Germany).

Polish national airline LOT also receive grants for operating routes from Poland, including from Poznan, Lublin, Wroclaw, and Gdansk.

Although the Ministry of Tourism's policy is to award grants only for a new destination, the table shows that two airlines have received grants for the same destinations in Poland, for example LOT and Wizz Air for operating a route between Tel Aviv and Lublin.

Low-cost airlines are not the only ones to benefit from the introduction of new routes. El Al also received grants for starting new routes from Tel Aviv to Las Vegas and Miami. The airline received a €1 million grant for these two routes, although it is not clear how useful the two routes are for encouraging incoming tourism and whether they serve mostly Israeli passengers.

Like El Al, United Airlines also won a grant for operating a new route between Tel Aviv and Washington. For three weekly flights on this route, the US airline received a €750,000 annual grant, as did South American airline LATAM for operating a three weekly flights from Tel Aviv to Sao Paolo (Brazil) and Santiago (Chile).

Air India, which launched direct flights between Tel Aviv and Delhi in 2018, received a €750,000 grant. The Indian airline made history and angered El Al by operating the first route every from Israel passing through Saudi Arabian airspace, thereby shortening travel time by 90 minutes. In addition to more convenience for passengers, this cut Air India's costs on the route. El Al is still alleging, including in a court case, discrimination against the state for allowing operation of the route through Saudi Arabian airspace, while El Al is unable to use this route for its own flights. At this stage, Air India is the only airline operating flights to Israel that pass through Saudi Arabian airspace.

Chinese airlines have also received grants. Hainan Airlines received €750,000 for its three weekly flights to Shanghai in 2017-2018. The company recently announced that it was discontinuing the Shanhai-Tel Aviv route, but said that this was a temporary measure. Another Chinese airline to receive a grant is Sichuan Airlines, which inaugurated a Tel Aviv-Chengdu route a year ago and received €500,000 for two weekly flights.

The grants to airlines for introducing routes to new destinations have so far totaled €12.85 million in three years. This is not a large proportion of the Ministry of Tourism's annual budget. The Ministry of Tourism is also providing a €60 subsidy per passenger flying directly to Ramon Airport. These grants are more than triple the grants for flights operating from Ben Gurion Airport.

To illustrate the point, the Ministry of Tourism's subsidy for foreign airlines that operating flights from Europe to Ramon Airport last winter totaled NIS 40 million. Most of the airlines that received this subsidy were also low-cost airlines.

Did the grants for airlines operating international flights to Ben Gurion Airport achieve their purpose of increasing the number of tourists visiting Israel? Israel finished 2018 with 4.1 million incoming tourists, compared with 3.6 million in 2017, a 14% increase.

In comparison with 2016, before the grants were instituted, the increase is 42%. Incoming tourism continued to increase in the first half of 2019. Tourist entries in January-August 2019 totaled 2.9 million, 10% more than in the corresponding period last year.

An examination of the table of grants according to destinations and the number of tourists who visited Israel from them shows that €3.75 million, amounting to most of the grants, were awarded for flights from various destinations in Poland, one of the countries where the Ministry of Tourism is making a major effort to promote as a potential source of tourism to Israel. In some cases, a grant was given to two different airlines for flying to Israel from the same destination. Although the number of tourists from Poland increased, it is still marginal in comparison with total tourism. The number of tourists visiting Israel from Poland totaled 151,000 in 2018, 97,000 in 2017, and only 51,600 in 2016: 300,000 tourists in the three years, constituting 3% to Israel's total incoming tourism during those years.

The Ministry of Tourism points out the steep increase in the number of tourists from Poland and the breaking of the LOT-El Al duopoly, with competition in flight prices to Poland being encouraged. The ministry cites a change in the composition of tourists and the extension of tourism beyond pilgrimage tourism from Poland.

China is another destination marked by the Ministry of Tourism as having huge potential for incoming tourism. Airlines received €1.25 million in grants in the 2017-2018 tourist season, but the number of tourists visiting Israel from China in 2018 was only 115,000, compared with 124,000 in 2017.

It is difficult to single out a single cause for the increase in incoming tourism to Israel. It is affected by the relative security calm, Israel's image, positive feedback from visitors and tourists on social networks, and the marketing efforts by the Ministry of Tourism, among other things the above-mentioned grants.

"The Ministry of Tourism's grants to airlines are proving themselves time after time. The grants are specifically designated for marketing activity by the airlines among the target audience in various countries, and their marketing campaigns are therefore very significant and complement the ministry's marketing activity," Ministry of Tourism director general Amir Halevi said. "The proof is that incoming tourism is continually rising, and we are confident that these grants will lead to the opening of additional routes, especially from remote destinations. We will continue breaking records in incoming tourism."

One the important achievements by Levin, who did not regard the ministry as an ordinary assignment, was increasing the ministry's budget to €1.2 billion a year. A dominant full-time minister will have to continue this policy, and especially to realize the cultural, political, and economic importance of the tourists visiting Israel. The grants program for 2019-2020 has already been submitted, but will depend to a large extent on who takes Levin's place.

Published by Globes, Israel business news - - on September 18, 2019

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

Wizz Air  plane photo: Shutterstock
Wizz Air plane photo: Shutterstock
Twitter Facebook Linkedin RSS Newsletters גלובס Israel Business Conference 2018