Analysis / More Important Than Open Skies

U.S. aviation authorities are examining - not investigating, emphasizes El Al - whether there was price collusion in El Al's cargo flights to the U.S. Another 15 airlines that fly cargo to the U.S. will take part in the same examination to determine whether there some form of price-fixing took place.

Don't worry, a similar examination - examination, not investigation - will not take place here in Israel.

The reason is simple. Antitrust law in Israel simply does not apply in this case. When the law relating to antitrust and restrictive trade practices was passed, it had one - and only one - exception added. The exception stated that the aviation sector and sea transport would not have the law applied to them.

Therefore, according to this specific exemption, the aviation industry can openly and willingly implement and enforce anti-competitive agreements.

Of course such agreements have a fascinating non-Hebrew name: code sharing. But what such agreements really do is to look after the mutual interests of two airlines that fly from one home airport to the other. Anything at all can be written into such agreements, including deals on dividing up market shares, limits on the number of flights, price-fixing. These deals can even include a section where one airline agrees to give up flying the route and in return is compensated by the other airline.

That is the reason why Indian, South Korean and South African airlines do not fly to Israel, for example.

The big battle over the open-skies policy in Israel has been dragging on for two years already, and has presented the illusion that the problem is the limits on the number of fights. In reality, this is far from the truth.

Just look at the New York route. The skies to New York have opened up and Israir has received the right to fly to the Big Apple - only for the purpose of setting up a code sharing agreement with El Al, it seems. The result will be that is highly unlikely that any competitive benefits will come out of the new route and open skies.

What good has the open skies to New York done for the consumer? None whatsoever.

The fight over the open skies policy, while important for its own sake, is only of secondary importance.

The real fight must be over the removal of the exemption from the antitrust law, and putting the aviation industry under the purview of the Antitrust Authority.

Only such an examination could prevent the present dividing up of the market and price-fixing that is now acceptable, and enable true price competition.

As a result of code sharing agreements, the aviation industry goes about business in most of the world far from any competitive pressures. And Israel, in that way, is like most of the world. That fact is El Al's - and foreign airlines' - main claim against any change to the law.

But the world is changing. In the U.S., restrictive trade practices are illegal, and even in the European Union there are moves in this direction.

Israel - which is so dependent on air transport for its world trade - certainly can no longer allow itself to be the last to join the global bandwagon.