The Finance and Tourism ministries, along with the Antitrust Authority, are leading a government reform to cancel the airline industry's exemption from antitrust laws.

The purpose of the reform, which was approved by the cabinet a month ago as part of the Economic Arrangements Law for 2007, is to improve competition in the aviation sector, and lower ticket prices - which would serve to increase the number of passengers to and from Israel.

The present exemption allows airlines to coordinate ticket prices between them, and to sign cooperative agreements - all at the customer's expense.

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The narrowing of today's sweeping antitrust exemption would allow the Antitrust Authority to disallow or change such agreements. An example would be code sharing deals, which allow, among other things, for one airline to fly passengers as if they were flying on a competing airline.

El Al now flies to India, for example, taking the place of an Indian carrier, which receives monetary compensation from the Israeli carrier in return.

An inter-ministry steering group will be established to change the law. The group will be led by the director general of the Transportation Ministry, or his representative.

Other members will include the head of the Budgets Division of the treasury and the director general of the Foreign Ministry, or their appointees.

Paragraph 3(7) of the Restrictive Trade Practices Law includes a broad exemption from the application of antitrust laws to all forms of international sea and air transportation.

"The section opens a very wide avenue to make restrictive agreement that harm competition and the public, by fixing prices and dividing the market between carriers among other things. The result of the matter is that even though such agreements may seriously harm competition, they are protected from examination and correction. The existence of such harmful agreements is likely to prevent the efforts to advance competition in the aviation sector for the good of consumers," the cabinet decision to encourage competition in the aviation sector stated.