The Israel Railways union signed an agreement with management yesterday after a year and a half of labor sanctions that caused numerous interruptions to train service.

The deal forces the management to cancel its contract to outsource maintenance to train car manufacturer Bombardier, and gives the employees 25% raises and NIS 40,000 one-time grants. The agreement is in force for eight years. In exchange, the union promised not to launch labor sanctions for three years.

The deal was signed after a late-night negotiating session, as the employees were planning to launch a strike on Tuesday. The strike was canceled at the last moment.

Under the agreement, the company will forgo its plan to set up a subsidiary to carry out maintenance work. An external contractor will be responsible for maintaining old cars; ultimately 30% of electric train cars will be maintained by a contractor.

The company will go ahead with its plans to create subsidiaries to handle its real estate holdings, cargo shipping and business development. In addition, the company will directly employ the 140 ticket counter employees and include them in the collective wage agreement.

While railway employees will maintain responsibility for the maintenance of most train cars, the railway's shops will be reformed - they will be open 24 hours and become subject to oversight by the management. In addition, all disciplinary measures against union leaders will be dropped. Several union leaders, including chair Gila Edrey, had been suspended for threatening workers or assaulting the CEO, and two had been fired.

The agreement with the workers will force the management to cancel its outsourcing agreement with Bombardier, and thus will owe the company €1 million in compensation. But since the railways intends to buy dozens of new train cars from Bombardier in any case, this may offset the fine. Under the latest agreement, Bombardier will handle maintenance for old train cars and electric cars acquired in the future.

The sides expressed satisfaction with the deal at a press conference yesterday. "I'm happy to say it's over," said Edrey. "The employees can be proud of this agreement, which protects them and gives the railways a face lift."

Railways chairman Uri Yogev stated, "We're setting out on a new path. There are currently three candidates to maintain the old train cars, and the [winning] company should start handling maintenance by the end of the year. We'll go on developing the stations and launch the double track to Be'er Sheva. I hope that free Internet will be available on the trains by September, as well as a smart card that works with the bus service and a new sign system. The agreement will let the railways focus its energy on improving service and arriving on time in more than 90% of cases."

Transportation Minister Yisrael Katz said, "A new railways was created today. The agreement will allow us to incorporate private entities with management knowledge into the railways."

Histadrut chairman Ofer Eini, who played a key role in the talks, said, "This was a conflict over a matter of principle. Most maintenance work will be left with railways employees. Another accomplishment is that employees are not being dismissed amid a labor conflict. I hope we'll ultimately see fruitful cooperation."