Israeli airlines are not ready for the new reality

The Israeli airlines that opposed the signing of the open skies agreement between the EU and Israel are not ready for the new reality this agreement creates – this fact was known to all the involved parties during the negotiations that preceded the signing.

The biggest problem is faced by EL AL – the largest of the three. If anyone needed proof it came in the form of a statement by the
First Israel Mezzanie Investors Fund (FIMI), which expressed its intention to invest in EL AL.

The fund said on July 16 that it would extend the timeframe for reaching an agreement, with this extension expiring on 29 August. This morning, however, FIMI extended the timeframe until 15 October.

In a prior notice to the Tel Aviv stock exchange, the fund said in view of the slow progress in talks on a new labor contract between the company and its employees – and because signing this agreement to FIMI’s satisfaction is one of the conditions for closing the investment agreement – FIMI believes there is little chance that the investment will be made on the date set in the investment agreement.

In order to improve its chances of closing the deal, FIMI is extending the agreement.

FIMI understands that without the lay-off of at least 1,000 employees, EL AL will not be able to achieve the profits its current shareholders were promised.

The open skies agreement was signed despite Israeli airlines’ opposition.

The EU-Israel air transport market will be opened gradually over the next five years, so that by 2018 the market will be fully open, with no restriction on the number of flights.

The agreement is expected to encourage greater direct connections, which in turn could drive down prices.

Under the agreement, according to an EU statement, Israel will “implement regulatory requirements and standards equivalent to EU aviation rules in areas such as aviation safety, environment, consumer protection – including passenger rights – air traffic management, economic regulation, competition issues and social aspects”.

On 26 August, Giora Romm – director general of the Israeli Civil Aviation Authority (CAA) – told me that the Israeli airlines “are not ready enough [for] the new situation”.

This statement is meaningful, as it comes from someone who knows all the fine details.

So, despite getting ready for a new reality, Israeli airlines – and especially EL AL – are continuing to operate as if nothing has changed.

Facts in the face again and again have not changed the situation. For the airlines this situation will only get worse.

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