Israel and the European Union signed an "open skies" aviation agreement on Monday to increase competition between airlines. The new agreement will take effect gradually starting on April 1, 2013, and its full implementation will take five years.

The new agreement will replace existing bilateral agreements between Israel and each EU nation specifying which airlines are allowed to fly to which destinations, as well as the frequency of flights.

But the agreement is not official yet, as the cabinet and Knesset both have to approve, as do various EU institutions. The head of the Israel Civil Aviation Authority, Giora Rom, signed the deal with the EU's chief negotiator Klaus Gail.

The deal will be phased in over five years, with each new phase going into effect in late March of the year. The two sides have been discussing such a deal since the end of 2008. A memorandum of understanding was signed on the deal four months ago, but Transportation Minister Yisrael Katz delayed signing off on the final pact after objections were raised over its effect on the local airline industry. Katz gave Rom the go-ahead to sign despite the objections of Israeli airlines, first and foremost El Al, which claimed the agreement would ruin them.

Katz put the pact on hold two months ago after the Knesset Economic Affairs Committee demanded that the government conduct an economic study to determine the effects of the agreement on Israeli airlines. But the EU also put diplomatic pressure on Katz - and on Prime Minister Benjamin Netanyahu - to sign the deal immediately. The European Union's ambassador in Israel, Andrew Standley, met with Katz recently on the matter, while Netanyahu met separately with European Commission President Jose Manuel Barroso, at which time the agreement was one of the issues discussed.

"I was convinced it is a good agreement and also includes advantages for Israeli aviation," said Katz Monday. "I believe in the abilities of the managers of [Israeli] airlines to lead to prosperity and success even in an open and competitive environment. The agreement will enable the lowering of the cost of flights between Israel and Europe, and will open new destinations," he added.

Tourism Minister Stas Misezhnikov also praised the agreement, saying it would catapult incoming tourism and lower ticket prices. The state must also find ways to guarantee the stability of Israei airlines, said Misezhnikov.

A set number of weekly flights to certain destinations will be added every year. At the end of the five-year period there will be full competition on all routes between Israel and the EU, and every airline from the EU or Israel will be allowed to fly to any destination within the region as many times as it wants.

The agreement differentiates between flights that terminate in Israel or the EU and that continue on to a final destination. Such traffic using a European airport as a connection to further destinations, such as the United States or the Far East, has become quite common in the past decade. This has hurt Israeli airlines in particular as they are not members of any international airline alliances. The EU is Israel's most important destination for flights, with 57% of all Israeli international passenger flights going there. Direct flights currently link Israel Israel and 16 EU nations.

Another section of the agreement addresses harmonizing aviation laws between Israel and the EU. For example, many European laws have no local counterpart, such as laws on flying disabled persons. The new agreement will force Israeli airlines to comply with European rules, which will entail significant spending.

Israir said the company has prepared itself for Open Skies in light of the decision, and believes it will be able to maximize its relative advantage.