Low cost fares: Not on Tel Aviv - Eilat flights

Arkia  photo: PR

Lack of competition means fares from Tel Aviv to Europe can be cheaper than to the Red Sea resort. Can the Transport Ministry improve the situation?

The open skies policy has cut the prices of flights to and from Israel, with prices to flights to nearby destinations, such as Cyprus, falling below $100. Tourists flying to Eilat from European countries are also benefiting, but flyers on internal flights on the Tel Aviv-Eilat route are still paying NIS 700 ($200) roundtrip for a 45-60-minute flight.

Only two airlines operate internal flights to Eilat from Sde Dov and Ben Gurion Airport: Arkia Airlines Ltd. and Israir Airlines and Tourism Ltd. In addition to the lack of competition, these two airlines also pay much lower airport fees than airlines operating international flights. The Israel Airports Authority states, "The Airports Authority finances costs of flights for almost two million passengers a year from its own resources… The fees paid by an international airline for its activity in Israel are in no way comparable to those paid by a company for internal flights."

According to the Airports Authority, landings fees are NIS 600 for an Embraer 195 and NIS 830 for an Airbus 320. Arkia has both of these planes in its fleet.

"For the sake of comparison, on an international flight, the landing fee for an Airbus plane is $8,000-9,000. Parking fees on internal flights are less than NIS 40 a day, and the Israeli airlines pay nothing for portage. There is no comparison," the Airports Authority declares.

The Airports Authority attributes the high cost of internal flights to the absence of competition, saying, "The possibility of opening the internal flights market to competition by foreign carriers will be considered."

El Al takes off, prices go down

2.5 million vacationers visit Eilat annually, of whom 300,000 are foreign tourists. The increase in the latter number is attributable to direct flights to Eilat from various European cities. Prices for these flights, $50 in each direction, are sometimes subsidized by the Ministry of Tourism and the Israel Hotel Association in the framework of the winter campaign aimed at boosting tourist traffic to the city.

For foreign tourists, the cost of the vacation, i.e. the overnight and the stay in the city, is disproportionate to the cost of the flight. This difference is less dramatic for Israelis, for whom both flights to Eilat and hotel stays there are expensive.

"I would like prices to be reasonable and attractive, and the service for foreign tourists and Israelis coming to Eilat to be the best," says Eilat Deputy Mayor Eli Lankri. Commenting on the prices of internal flights, he says, "This might constitute something of an obstacle and keep potential vacationers away from the town, but it's a matter of supply and demand. There are periods with low demand, and prices fall, and there are bargains and hotel and flight packages.

"I assume that if more companies operated on the route, prices would be more attractive. Our goal is to see more foreign tourists and Israelis coming to Eilat, and it's clear to us that the potential for tourism in Eilat is far from being realized."

El Al Israel Airlines Ltd. (TASE: ELAL) began operating flights from Ben Gurion Airport to Eilat in 2010, giving a boost to competition with two daily flights that began at NIS 99 a flight and ballooned to NIS 250. The result was immediate: Israir and Arkia lowered their prices and began offering bargains, although even then, the prices of flights with higher demand were NIS 360 in each direction. Today, seven years later, prices have remained at the same level, even though fuel prices fell dramatically, and were low until a year ago.

In September 2013, El Al announced the termination of activity on the Eilat route, citing security reasons, due to the change in the flight path required by the Israel Civil Aviation Authority. Following El Al's announcement, the chairman of the Arkia workers' committee sent a letter to Minister of Transport Yisrael Katz asserting that El Al had discontinued its flights to Eilat because they were unprofitable, and had misled the minister. In response, El Al claimed that there was no connection between the commercial angle and security, and called on Katz "to declare an open skies policy for Eilat, too."

Years passed. As a result of the open skies policy, 140 airlines now fly to Israel, and prices have fallen, but this revolution has not included internal flights. At a press conference held by Katz to celebrate five years of the open skies policy, he announced that he would take action to introduce competition on the route to Eilat by having foreign airlines flying to Eilat stop at Ben Gurion Airport to let passengers off and pick them up. He specifically mentioned Ryanair in this context.

The Ministry of Transport told "Globes," "The Minister of Transport is taking steps to open internal flights to Eilat to competition and enable foreign airlines flying to Israel to conduct connection flights to Eilat in order to lower the prices."

Competition in transportation to Eilat could also come from a railway. Construction of a line from the central region to Eilat at a cost of hundreds of millions of shekels has been discussed for years, but as of now, this plan is far from ready. The Ministry of Transport says in the context, "The railway to Eilat is in the stage of planning and considering alternatives."

Most expensive: Late morning

In the absence of competition, it appears that the players in the sector also lack commitment to any level of service. Many passengers flying frequently to Eilat and Eilat residents complain about frequent delays and disruptions of flights and changes in flight times.

"I will never take the last daily flight, because it is quite likely to be canceled. Unfortunately, I know this from experience," says one Eilat resident. "The delays are for one hour, if you are lucky, and are a daily occurrence. Together with the delays, the need to arrive 90 minutes before the flight, and the trip to the airport, it takes as long as traveling to Eilat by car, including a stop for coffee."

Such complaints are quite frequent, and even the Aviation Services Law (Compensation and Assistance for Flight Cancellation or Change in Conditions) is of no help. The compensation for internal flights is substantially lower than compensation for disruptions of international flights, because the compensation is a function of the flight length. For a four-hour delay, the airline has to pay NIS 250 in compensation to passengers on flights to Eilat from Sde Dov, Ben Gurion Airport, or Haifa.

Price of flights vary according to the time of the flight. For example, flying to Eilat in the evening, which is less attractive for vacationers, costs less than in the late morning, for which demand is high. A flight in July for a family of five will cost NIS 1,255 at 9:45 AM, compared with NIS 1,546 at 11:15 AM.

At Arkia, for example, the price of a flight from Sde Dov to Eilat on a given day varies from NIS 203 to NIS 366. The supply of discount seats on flights is limited, and is therefore relevant mainly to those reserving tickets well in advance. It is also usually confined to the less desirable flight times. On the date we checked, the price of a return flight from Eilat to Sde Dov was NIS 366, regardless of the time.

Travel agents, as well as Arkia and Israir themselves, are marketing packages including a flight and a hotel. They are likely to offer a more worthwhile deal, but quite a few vacationers, among other things because of the increase in the supply of Airbnb apartments in Eilat, prefer to separate the flight from the hotel.

Arkia said in response, "Arkia's reservation system includes flights that are significantly cheaper than the prices you cited. Internal flights are priced, among other things, according to considerations of supply and demand, the extent of the service, dates, day of the week for the flight, and so forth. We add that internal flights in Europe and the US are also sold at similar prices."

Israir said in response, "Aviation is a very competitive business, with low profit margins and a high risk. The same applies to the Eilat route. Despite the rise in fuel prices, the average flight price has fallen in recent years. The prices are obviously affected by the flight times, whether it is on a weekend or in mid-week, and from what airport the flight takes off. Israir now offers those buying a hotel-flight package a price starting at NIS 79 in each direction, in addition to discounts for soldiers and Eilat residents."

Published by Globes [online], Israel Business News - www.globes-online.com - on June 7, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

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Arkia  photo: PR
Arkia photo: PR
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