Israel May Apply Antitrust Laws to Foreign Airlines

The effort comes as Israel readies to open up the aviation market to enhanced competition via the Open Skies agreement with the European Union.

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Citing the need to protect Israeli consumers and airlines, the Antitrust Commission is planning legislation that would apply the country’s antitrust laws to foreign airlines that fly to Israel.

The effort comes as Israel readies to open up the aviation market to enhanced competition via the Open Skies agreement with the European Union.

The cabinet approved the agreement on Sunday over intense opposition from the domestic aviation industry, which said it would create unfair competition.
Right now, Israeli law does not bar most foreign airlines from engaging in anti-competitive trade practices even though they provide service to Israel and compete with homeland carriers. It only applies to Israeli carriers and foreign airlines whose primary business is providing service to and from Israel.

The proposed law would put Israeli carriers and foreign airlines on a more even playing field and entitle consumers and Israeli airlines to sue for triple the actual damages resulting from violations of Israeli antitrust law. The triple damages are an effort to deter anti-competitive practices.

Violators of antitrust court orders would also be subject to possible criminal penalties. The legislation would clarify provisions of existing law, for example, by making it clear that any agreement to divide up the market among competitors is against the law.

El Al Airlines was the top carrier at Ben Gurion Airport in 2012, with a 33% market share, followed distantly by Arkia with 3.8%. Among foreign carriers, Lufthansa was in the third place with 3.5% of all passengers, with Turkish Airlines United Airlines each accounting for 2.9%, and Alitalia for about 2.6%.

Meanwhile, the Transportation Ministry is working to schedule the formal signing of Open Skies, which is designed to gradually deregulate air travel to and from EU countries and increase competition. Initially the pact will permit airlines to operate up to seven flights a week between Ben-Gurion and any European airport. That number will increase a year from now, and in 2018 all restrictions on the frequency of flights will be lifted.

“We would like to see greater support in general from the government for airlines operating here,” said Kobi Zussman, who is the representative in Israel of the international organization of scheduled airlines, the International Air Transport Association.

“The aviation sector in Israel is responsible for 2% of the gross domestic product and has a positive influence on the economy. If the country would support it more, it would be possible to develop it to a greater extent and expand its contribution to the entire economy of the country,” Zussman said.

He recommended that the government lower taxes on air travel during periods of low demand and encourage off-peak winter travel. He welcomed the cabinet’s decision this week to pay for almost all of the Israeli airlines’ security costs.
The extra subsidiary was offered after airline unions struck Israeli carriers and threatened to shut down Ben-Gurion International Airport.

File photo: An Arkia airplane on the tarmac.Credit: Courtesy

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