The Knesset Economic Affairs Committee yesterday put the brakes on the "open skies" aviation agreement with the European Union, which would loosen restrictions on flights between Israel and Europe, pending further study of the agreement's effect on the national airline industry. Details of the agreement have been fully negotiated, but Transportation Minister Yisrael Katz has not yet authorized the Israel Civil Aviation Authority to initial it, the next step toward formal ratification.

Committee members from parties in the government coalition backed the call to review the agreement, which means there is no possibility the ratification process, which requires Knesset approval, can move forward. Until changes are made in the country's aviation sector, the open skies agreement is not expected to be implemented.

"Open skies is a concept that sounds positive and captivating," said committee chairman Carmel Shama-Hacohen (Likud ), "with the promise of lower prices, which the Economic Affairs Committee almost always supports, but we know what the price will be."

The expectation is that with elections in the offing, Katz would prefer avoiding a confrontation with thousands of employees of Israel's airline companies, who oppose going forward with the open skies agreement until their demands are met. The Histadrut Labor Federation even declared a labor dispute about two months ago over the pact.

Civil Aviation Authority chief Giora Rom said the open skies agreement will increase the number of airlines serving Israel and the number of flights. Experience elsewhere shows that aviation liberalization leads to increases in the number of passengers and lower prices - one-third lower on average, he said.

"The agreement we came to went into great detail to protect the country's interests," Rom added, saying it would be implemented gradually over the next five years and be reevaluated after two years to gauge its effects, at which point it could be put on hold.

"Israeli airlines need to adapt themselves to the new situation and view it as an opportunity rather than a threat," Rom said.

However, El Al CEO Eliezer Shkedy told the committee that he couldn't rule out the possibility that his airline would collapse once the open skies agreement went into effect, due to increased competition from European airlines. Asked to rate the chance of such a collapse, he demurred, saying El Al was analyzing the likely impact of the agreement. He has also asked Prime Minister Benjamin Netanyahu to intervene to head off the pact's ratification.

The deal negotiated with the EU includes terms that Israeli airline companies opposed, and Shkedy has been joined by his counterparts at Israir and Arkia, the country's two other international carriers, in seeking Katz's commitment to suspend ratification until Israeli airlines' interests are protected. They contend that the deal does not provide their companies equal treatment with those of Europe, will hurt their European operations and could result in major layoffs of airline employees.

Asher Edri, who heads the workers' committee at El Al, told TheMarker that he welcomes the Knesset Economic Affairs Committee's wait-and-see stance.

The Transportation Ministry said it is proceeding with ratification of the agreement, but is also engaged in intensive contacts with all of those involved in the matter, noting that Katz recently met with representatives of El, Arkia and Israir and heard them out on their concerns.

For his part, Israir CEO David Kaminitz noted the dire financial straits of many airlines around the world and said his airline has made every effort to operate efficiently. "My recommendation to my shareholders is that if the open skies agreement takes effect, they should stop funneling money to the company."