Low-cost airline Ryanair this week launched a new direct route from Tel Aviv to Memmingen. If you have never heard this name and ran to look for it on Google, the answer is that Memmingen is a town of 44,000 in Bavaria, Germany, making it slightly more populous than Rosh HaAyin.
Ryanair, however, is not the only airline providing geography lessons with flights to destinations such as Baden-Baden, which many had not heard of before the route to it was launched, or to Wroclaw, Poland. A glance at the flight schedule of Wizz Air also challenges our geographical knowledge. The carrier operates flights to destinations such as Timisoara and Sibiu in Romania and Air Moldova will fly you to Kishinev in Moldova. On the one hand, it is nice to diversify the usual set of destinations for the Israeli traveler, which consists of Rome, Paris, and London, with small towns providing a refreshing tourist experience. On the other hand, this is not exactly the purpose that the airlines opening the routes to these small airports have in mind.
It is no accident that the companies involved in this trend are low-cost airlines for whom Excel spread-sheets - mainly the expense columns - are the overriding consideration. For these airlines, activity in the small airports is something they cannot lose on: the local airport authorities responsible for small airports like Memmingen are hungry for international aviation activity, while the companies receive an incentive in the form of reduced fees charged by the airports all over the world.
These fees are for services received by the airline at the airport for all of the activities involved in landings and takeoffs. They are set according to the landing hours, duration of the stay on the ground, work of the porters doing the loading and unloading, the number of checking counters, etc. When demand for an airport is strong and passenger traffic is large, such as at Heathrow Airport in London, one of the world's most popular and expensive airports, the fees charged are high. On the other hand, when a small and unimportant airport is involved, the fees are much lower. When an airport is distant from a major tourist destination, the rate is more attractive, and can also include incentives, such as a complete exemption from fees in the first year, a 75% discount in the second year, and 50% discount in the third year, and so on.
The fee exemption method is also known to authorities in Israel. For example, Ramon Airport near Eilat, scheduled to open by the end of the year, will give a fee exemption to airlines landing in it for three years. In addition, as is the case with Ovda Airport foreign airlines operating flights directly to Ramon Airport, an expanding group of airlines, will received a €60 subsidy for each passenger for the winter campaign, which is bringing tens of thousands of tourists to Eilat.
The fees charged by airport authorities for service to airlines at each airport constitute an important source of income for them. The fees are uniform for all airlines, but they can change according to the attractiveness and the state's wish to encourage activity of a particular airline. On the other hand, a tougher fees policy can leave potential airlines out of the picture. For example, Ryanair received no exemption or concessions at Ben Gurion Airport, and therefore agreed to fly officially to Israel only four years after the open skies policy was introduced when it received grants from the Ministry of Tourism.
Sweeteners from the Ministry of Tourism
In addition to reduced airport fees, a sweetener is also available in the form of a monetary grant from the Israel Ministry of Tourism for operating flights from relatively remote destinations. According to the Ministry of Tourism's rules, a foreign airline operating flights from new destinations to Israel will receive a €250,000 grant for each route, assuming that it fulfills the requirement of being a destination with potential for increasing incoming tourism to Israel. For example, Ryanair will receive a €500,000 grant for operating two weekly flights on the route to Memmingen.
In exchange, the airline has to invest this sum in local advertising marketing Israel as a tourist destination by sending a newsletter to the potential audience, a billboard campaign in the destination, seminars for tourist agents, etc. After the airline conducts marketing activities to the Ministry of Tourism's satisfaction, it is entitled to the grant.
Does the end justify the means?
This grants policy is not a frequent practice around the world. Furthermore, it does not extend to developing markets that are much hungrier for tourists than ours. The question therefore arises whether encouraging airlines as a means of increasing tourist entries to Israel should be accomplished by reducing airport fees, rather than grants from the Ministry of Tourism, as some parties believe. On the other hand, it does not appear that the fees paid by foreign airlines will be reduced, given Ben Gurion Airport's currently crowded schedule, which is the reason why Terminal 1, where fees are in any case lower, was assigned to low-cost airlines.
Is the money flowing behind the scenes in the form of grants, subsidies, or discounts on airport fees justified by the new records being set for incoming tourism? It appears that as of now, the correct answer is yes.
Published by Globes [online], Israel business news - www.globes-online.com - on September 13, 2018
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