Israeli airlines have long been banned from making deals with other carriers securing their agreement not to fly certain routes in exchange for annual payments. But the Antirust Authority does allow them to enter into code-sharing agreements with other airlines. In some cases, that has left fliers paying higher prices and it may have even deterred competition altogether.
Code-sharing, which is widely practiced throughout the airline industry, enables one airline to sell seats on another carrier as if the first airline were flying the route itself. In many cases, air passengers don’t even realize they will be flying another airline, or even more than one, until they reach the airport.
Airlines like code-sharing because it allows them to offer more destinations and more frequent flights. It gives them the opportunity to provide better connections and follow-on flights on a single ticket.
But Israel’s Antitrust Authority remains wary about the risk that code-sharing could undermine competition. The authority insists on approving each such agreement. El Al Israel Airlines has 13 code-sharing agreements, with carriers such as American Airlines and the Australian carrier Qantas.
A survey by TheMarker shows that in fact code-sharing does seem to work in terms of offering a range of prices on routes where there is competition. For example, on the Tel Aviv-Madrid route, where El Al has an agreement with Iberia Airlines, airfares in the first week of May range between $451 and $935 for flights. But on other routes — where only one carrier flies, whether it’s El Al or a foreign airline — consumers don’t benefit from lower airfares or more flights.
Indeed, some sources in the airline industry told TheMarker that one reason why El Al appealed to the High Court of Justice over Air India’s new Delhi-Tel Aviv route was over fears for its monopoly on other Asian routes, most notably Tel Aviv-Bangkok, which it has been able to maintain due to code-sharing agreements.
Air India was granted permission last month by Saudi authorities to overfly Saudi Arabia on its way to Tel Aviv, the first airline serving Israel to get such rights. Overflights cut travel times and costs considerably, putting El Al, which, as an Israeli carrier, is unlikely to get the rights anytime soon, at a disadvantage. Saudi Arabia and Israel have no diplomatic relations.
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The Tel Aviv-Bangkok route is heavily travelled, with about 200,000 people expected to book tickets this year, according to Thai tourism officials. El Al flies the route six times a week, but airfares are so expensive that most Israeli passengers fly to third countries to reach Thailand rather than fly directly.
Despite that, Thai Airways doesn’t fly the route. Some industry sources (but by no means all) said El Al is adamant about seeking an injunction against Air India because Thai Airways may start service to Tel Aviv if it can also get overflight rights.
An examination of airfares on the route show that El Al is offering fares of $819 for flights between May 1 and May 8, rising to $1,316 between August 7 and 14 and going back down to $819 during the period from November 5 to 12. In theory, Thai Airways offers flights on the same route under a code-sharing agreement with El Al, but the carrier’s website doesn’t feature flights to Israel at all.
On another route, between Tel Aviv and the Ethiopian capital, Addis Ababa, El Al has a code-sharing agreement with Ethiopian Airlines, but the Ethiopian carrier is the only one that services the route. People reserving seats for any of the May, August and November dates through El Al will pay $816. However if they order through Ethiopian Airlines, the price is just $453.
Shuki Fishler, whose company, Tal Aviation, represents Ethiopian Airlines in Israel, defended the code-sharing arrangements as beneficial to consumers.
“Code-sharing agreements allow an airline to sell routes it doesn’t fly. In this case, El Al gets a foothold in Africa and sell tickets from Tel Aviv to Tanzania and Kenya,” he explained. “The Ethiopian airline profits because it can market itself through a recognized local leader and enjoy higher status with customers.”
As to why there’s such a difference in airfares, El Al noted that it has sales and marketing costs the Ethiopian carrier doesn’t have. Passengers also feel comfortable about security knowing that El Al is a partner on the flight, Fishler added.