The Bottom Line / Rich Tycoons Are More Important to the Transportation Ministry Than You Are

If you try ordering airplane tickets now for the peak vacation season in August, you will find yourself in an interesting experience: Six months before your flight, you will probably be able to find tickets, even possibly at a reasonable price for peak times. But to guarantee your seats, you will have to pay for the tickets now, and any change - change, not cancellation - will cost you hundreds of dollars.

It is hard to imagine other business sectors that require full payment six months in advance, and with such drastic fines on top of it too.

This can only happen in an industry that is completely sure that its customers will be there no matter what, and therefore there is no need to compete on the conditions it offers them.

In other words, the airlines are in an industry with an incredible surplus of demand, and there is no fear that this huge over-demand will disappear in the foreseeable future.

Why? Because the Transportation Ministry makes sure in practice that the excess demand continues. This then forces Israelis to bend over backwards to fit themselves to the demands of the airlines - and of course the outrageous prices that go with it - just so they can take a trip abroad.

What open skies?

No, of course this is not the officially published policy of the ministry. Transportation Minister Shaul Mofaz and his director general, Gideon Siterman, make bombastic statements praising their policy of Open Skies.

The only problem is that underneath the cover of the talk, the ministry is actually doing the opposite: It prevents opening Israeli skies to true competition. It does so by granting the rights to land in Israel sparingly, and even these rights are made dependent on a long list of strict demands.

For example, the ministry is very proud it opened the London route to competition. In other words, the ministry signed an agreement allowing two more airlines to fly the route alongside El Al and British Airways. BMI and Arkia won the honors for now.

The doubling of the number of airlines licensed to fly the London-Tel Aviv route is without a doubt a wonderful example of opening the industry to competition, except that this little step almost did not take off. When the ministry discovered that London's Heathrow Airport had allocated Arkia a landing slot at an inconvenient hour, which was likely to lead the airline to give up its London rights, the ministry notified BMI that it was banning it from starting its Israel flights until it pressured Heathrow into improving Arkia's slot.

In simple terms: the Transportation Ministry held Arkia's British competitor hostage so it would make sure British authorities improved the conditions for its Israeli competitor. And if it did not do so, then there would not be any competition on the London route.

The ministry does not see any problem with this policy. "The fact is it worked, and Arkia's time slot was improved," said Siterman.

"That is how we made sure the number of competitors on the route would grow to four. Otherwise, we would have been left with only three competitors, because Arkia would not have flown," he added.

$300 million in lost revenues

And in the British case, the pressure worked. But in the case of Germany, on the other hand, in a similar situation similar pressures failed. The routes to Germany are still in the sole hands of Lufthansa and El Al.

As far as Siterman is concerned, there is nothing wrong with that. "We are in favor of competition, but only equal competition, fair and mutual between Israeli and foreign airlines," said Siterman.

So what this really means is that the most important thing as far as the Transportation Ministry is concerned is the the rights of the Israeli airlines. If the ministry had been willing to give in on the demand for reciprocity, it would be possible at least to increase the number of seats available to Israel on the various routes - at least in one direction.

But the ministry is worried about the interests of the aviation industry and the airlines. It has chosen to punish foreign competitors who did not grant reciprocity to Israeli airlines.

The only thing it seemed to forget is that the people who are actually paying the price are the tourists, who are not coming to visit Israel because of the high prices and lack of available seats; the Israeli customer also pays because they are forced to fly with an industry who offers high prices and unreasonable terms and service; and the entire Israeli economy is paying the price - losing $300 million a year in lost tourism revenues. (By the way, the figures for potential lost revenues come from an official committee appointed by the Transportation Ministry itself, and chaired by Siterman himself.)

The loss of hundreds of millions in potential revenues to the Israeli economy as well as the good of the Israeli consumer stand in opposition to the "rights" of the airlines - and their profits.

Remember, Israeli airlines are not amorphous bodies - they are private companies owned by the Borovich family, El Al; by Nochi Dankner's IDB consortium, Israir; and the Nakash brothers, Arkia.

It seems all of these tycoons have the right to make a pretty profit, in an aviation market without barriers but also without competition.

The Transportation Ministry has decided that the rights of the rich airline owners are more important than your rights to fly at reasonable prices and receive quality service.