Egged to lay off 3,100 as part of subsidy deal

Egged

By 2030, all Israeli bus routes will be put up for tenders, which Egged will have to bid for against its rivals.

Following lengthy negotiations, the Ministry of Transport, the Ministry of Finance, and the Egged bus cooperative have approved a new agreement for the operation of Egged's public transportation routes. Transportation sector sources say that the agreement includes subsidies amounting to NIS 1 billion a year over 10 years. Egged will streamline and become a commercial company, while the Ministry of Transport will put all of its routes up for tenders by 2030 and 3,100 of Egged's members will retire.

The new agreement provides Egged, whose business has not been profitable in recent years, with a new economic horizon. Unlike Egged's previous agreement, the new agreement makes payment of subsidies to Egged contingent on actual bus rides and incentives for carrying passengers.

The purpose of putting all of Egged's routes up for auction is to reduce the company's current 35% market share in public transportation. The plan is to auction off 35% of Egged's routes next year; in some areas where Egged is active, auctions for the routes will be published in the coming months in which all of the public transportation companies can participate: Superbus, Kavim, Dan, Metropoline, etc.

Most of the routes in the auctions are in large cities. In Jerusalem, for example, 50% of the public transportation routes will be put up for auction in the coming months - 80 routes carrying 60 million passengers a year. More auctions will be published in 2020 for operating dozens of service lines, including in the suburbs of Rishon Lezion and Haifa. Auctions will be published later for operating Egged's service routes in Holon, Haifa, Hadera, the Negev, and the Galilee.

As part of the agreement, Egged undertook to implement major streamlining, including structural change and recruitment of a private investor. At the end of the agreement period, Egged will be able to operate under competitive conditions. As part of its preparation for full competition, money will be allocated for the retirement of 1,300 of Egged's 1,500 members and 1,800 of its 2,400 first-generation employees on the stipulated terms.

In addition to employee retirement and preparation for competition, Egged, currently a cooperative, will become a commercial company and will have to maintain an acceptable level of service on the routes being put up for auction. Egged's bus fleet will be renewed by 2021 in order to meet the auction requirements (a maximum bus age of 10 years, compared with 15 years at present). The company will procure 150 electric buses and take additional measures.

Katz: We'll upgrade public transportation

Streamlining will include tens of millions of shekels in saving on Egged's operating costs. According to the Ministry of Transport, the agreement includes NIS 1 billion in savings from putting Egged's routes up for auction. This saving is designated to fund "improvement of service, added services, greater bus frequency, and the use of advanced technologies."

Minister of Transport Yisrael Katz noted that approval of the agreement's principles "will make Egged a leading modern competitive company for the benefit of people in Israel and Egged's members and employees." He added, "The agreed principles will significantly upgrade public transportation service and the level of service for passengers. The agreement's principles include lowering the age of public transportation buses, operating electric buses on a large scale, entering buses from the rear door, integration of new technologies in public transportation and bus stations, and better information for passengers.

"The agreement signed facilitates further opening of the public transportation sector to competition on the one hand, which will improve service for passengers and increase the use of public transportation, while on the other hand enabling Egged to prepare to operate under competitive conditions, while taking car of its veteran workers who have contributed so much to the development of the public transportation sector since the state was founded."

Egged currently operates 2,950 buses and carries 900,000 passengers daily on urban and interurban routes.

Egged chairperson Avi Friedman said today, "Egged is a full partner with the Israeli government and the Ministry of Transport in implementing the ideas for regulating the structure of public transportation in the coming decades in Israel. The current agreement resolves the structure of public transportation in Israel and ensures the future status and stability of Egged.

"The agreement is the most significant for Egged since it was founded. The three years of continuous negotiations for it reflect the depth and complexity of the matters involved and the effort to improve customer service, together with an uncompromising commitment to granting long-term economic security and stability to Egged's employees and members." Friedman added that Egged had undertook in the new agreement to implement structural change including a transition from cooperative to commercial status, taking on a partner, and implementation of efficiency measures that would enable Egged to cope better with the competitive challenges facing it.

Published by Globes [online], Israel business news - www.globes-online.com - on June 14, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

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