Three years after the government began offering foreign airlines subsidies to open new routes to Israel, the number of tourist arrivals has ballooned on the routes benefiting from the aid. But the cost has been high and in the case of Eilat the boost to the local tourism industry may be less than it seems.
Figures obtained by TheMarker show that airlines opening new routes to Uvda Airport, which serves the southern resort city of Eilat, were paid 8.3 million euros ($9.4 million) for the 2017-18 winter season, while those flying to Ben-Gurion International Airport, Israel’s main international airport, were paid 13.75 million euros over 2016-18.
But in the case of the Uvda assistance, there are indications that Israel is not only luring overseas visitors to Eilat but to nearby Jordanian and Egyptian resorts, too. In effect, Israel is subsidizing their tourism industries.
Israel was a late and reluctant entry into the practice of subsidizing airlines to fly to their country, but after the disastrous 2014-14 tourism season for Eilat, tourism officials decided they had to take drastic measures.
Following Operation Protective Edge in 2014, during which foreign airlines briefly halted flights to Ben-Gurion out of fears of rocket attacks, the number of passengers coming through Uvda fell to just 25,000 in the 2014-15 winter season, from 68,000 the year before.
Airlines were offered 60 euros for each passenger they flew into Uvda, paid two-thirds by the Tourism Ministry and one-third from the Eilat Hotels Association. From a low of 60,000 for Uvda travel for all of 2015, the number has grown to 250,000 this year, without counting December.
“If the Greeks, the Jordanian, the Egyptian and even the Spanish Canary islands do it, we also need to play the game,” said Shabtai Shay, the director of the Eilat Hotels Association.
“You can’t keep saying to the airlines, ‘Well, Jesus was born here and the sun shines all year’ to get them to open new routes to Israel. You have to offer them a financial incentive,” Shay said.
Still, the association isn’t kicking in money to the program this year. Figures for overnight stays at hotels in Eilat don’t show the same rate of increase as the number of travelers coming through Eilat.
One reason is that many tourists opt to stay in vacation apartments rather than hotels. Another is that according to Tourism Ministry estimates 10% of those flying into and out of Uvda are Israelis — most of them people who live in the south and use Uvda to fly to Europe and back.
The airline subsidies apply to them just like foreign tourists and last year the government paid out an estimated 500,000 euros for Israeli passengers.
But the bigger problem is that many tourists landing at Uvda double their savings by enjoying Israeli-subsidized airfares but cheaper hotels in Jordan’s Aqaba and Egypt’s Sinai.
There are no official figures on the number of tourists landing at Uvda who don’t remain in Israel for their vacation, but figures at the Rabin crossing point into Jordan give some indication: From a low of about 51,700 in the 2015-16 winter seasons, the number skyrocketed to 277,400 in 2017-18, according to the Israeli Interior Ministry’s Population and Immigration Authority.
Travel to Egypt through Israel took longer to develop, due to the collapse of the Egyptian tourism industry after 2015 when a Russian airliner was brought down flying over Sinai in a suspected bomb attack. But Egyptian tourism has revived and the number of crossing at the Begin terminal rose to 253,100 in the 2017-18 season from 115,500 in 2015-16.
The aid program for airlines started at Ben-Gurion Airport in 2016 and was structured differently. Airlines aren’t paid per passenger but offered a fixed amount annually per the number of weekly flights on new direct routes to and from Israel that are at least 120 kilometers distant. A single weekly flight qualifies for 250,000 euros, three 750,000 euros and 20% more than that that for six.
Moreover, the airlines are required to use the money for marketing in their home countries travel to Israel, which one Tourism Ministry official said was more effective than the campaigns his ministry mounts because the carriers are trying to sell tickets, not Israel’s image.
The program recently elicited controversy because El Al Airlines, Israel’s flag carrier, got 250,000 euros for opening a new route to Las Vegas. Industry sources estimates that 70% to 80% of passengers on the route will be Israelis and questioned why the government was subsidizing them.
The ministry said an expert study showed the grant was justified but declined to say what criteria it used or how it reached its conclusions.
Since the program began the biggest recipients have been LOT Polish Airlines, which has received 2.05 million euros for seven new weekly flights. The low-cost carrier Ryanair has 2.3 million for eight weekly flights from Poland. Wizzair is the biggest recipient of them all with 3.3 million for 12 flight’s weekly. Air India is expected to get 750,000 for its new New Delhi-Tel Aviv route.
There are no data on how the subsidized flights are doing, but figures from the Central Bureau of Statistics show that in the first 10 months of this year tourist arrivals from Poland were up 89%, compared with the same time in 2017. Air India’s new route boosted incoming tourism from India by 21%.
“An airline that opens a new route takes a risk and a major financial investment — far more than the grant,” said a Tourism Ministry spokesman, defending the program. “The grant is an important component in reducing the risk and in deciding to open a route.”
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