New Tender Unlikely to Cut Cab Fares From Israel's Ben-Gurion Airport

Taxi firm could end up paying state more, not less, under changed terms

Taxis wait outside Israel's Ben Gurion Airport.
Tomer Appelbaum

When the transportation and finance ministries announced two weeks ago they were restructuring the way they award the contract for taxi service from Ben-Gurion International Airport, the message was that passenger fares would come down because the Israel Airports Authority would no longer be collecting royalties from whoever wins the franchise.

Moreover, the contract will no longer be based on how much the taxi companies are willing to pay in royalties, but on how low their fares will be relative to a tariff ceiling, the two ministries said. The airport was also supposed to allow more competition, by permitting taxis from additional companies to pick up arriving passengers.

But a closer reading by TheMarker of the terms of the tender reveals a completely different story: The winner of the tender and fare-paying passengers will both be saddled with higher costs, in fact, than before.

Under the current system, Hadar-Lod — the taxi company that has had the monopoly on Ben-Gurion service for as long as anyone can remember — paid the Israel Airports Authority annual royalties of 6.3 million shekels ($1.7 million). In addition, each passenger paid a surcharge of 5 shekels.

In theory, the revenues from those royalties and fees go to paying the IAA’s expenses for the area outside the terminal it allocates to the taxis, as well as the cost of a dispatcher. But in fact, Hadar-Lod pays for those costs, including 350,000 shekels a year to lease offices and parking space.

Under the three-year tender, each time a taxi picks up passengers at the airport, the driver must pay an authorization fee of 5.80 shekels, while the 5 shekel surcharge per passenger will remain in place.

The IAA reported that 1.425 million people used taxi services at Ben-Gurion International last year. Assuming the same numbers, the new 5.80 fee will add at least 8.3 million shekels to the authority’s revenue — 2 million shekels than it currently receives in royalties.

And with passenger traffic at Ben-Gurion growing sharply — foreign tourist arrivals were up 24% year on year in the first three months of 2017, the Transportation Ministry said on Sunday — the revenues will grow.

Together with the 5 shekel fee that will be remaining in effect, the IAA will be enjoying 15.5 million shekels in income from taxi service — money that as a government agency it shouldn’t be collecting except to cover its costs. But with air travel growing so quickly, the IAA has more income than it can spending and has been forced to turn over excess income to the treasury.

In response to questions by TheMarker about the new tender terms, the IAAS said the 5 shekel fee will continue because it is “anchored in price-supervision orders” and can’t be amended. As to the new 5.80 charge, the IAA spokesman insisted it would lead to a 30% reduction in what taxi companies pay now because they would be paying per ride rather than a fixed monthly fee.

“The terms of the tender explicit prohibit authorization fees to be passed on to taxi riders,” it added. The Transportation Ministry declined to respond.

In addition, however, all the costs associated with operating the taxi service will fall on the franchisee.