The Antitrust Authority is considering letting the country's three airlines cooperate, but only if Israel signs an open skies agreement with the European Union, which would fully expose the local companies to international competition.
Until now, the trustbuster had not agreed to let El Al, Israir and Arkia work together, and it blocked them from signing code-sharing agreements with foreign airlines it thought might impede competition.
The Transportation Ministry discussed the matter with the Antitrust Authority given the advances in talks with the European Union.
In the first stage, the airlines would probably be allowed to cooperate on their operations in Europe. The regulator is not likely to allow them to cooperate on flights within Israel, however.
The current plan is to carry out the open skies agreement in stages over the next six years. This means that if it goes into effect at the beginning of 2013, it will not be implemented fully until 2018.
This is in keeping with the Israeli airlines' demand that the change be carried out slowly; Europe had been calling for a much quicker implementation.
The agreement would let Israeli airlines compete freely against European airlines when flying in and out of Europe, and would give European airlines the same privileges in Israel.
Transportation Minister Israel Katz came under criticism last week after he ordered a delay to the deal until after resilience tests were conducted for Israel's airlines. He denied bowing to pressure from the airlines.
Want to enjoy 'Zen' reading - with no ads and just the article? Subscribe todaySubscribe now