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Friday, April 27, 2007

Why that ticket to Israel is still so expensive

I was snooping around a US airline website this weekend and discovered that I could fly from Boston to London next weekend roundtrip for $400. But a direct flight from Israel to the US and back costs around $1200. And it's not even high season yet. Why can't you get a cheaper fare?

The Thursday before Pesach (Passover), I had a call from a cousin of Mrs. Carl in Jerusalem who had just arrived in Israel from the US. She told us that 46 people had been bumped from her Wednesday night flight from New York. And there were no more flights. Why isn't there enough capacity to fly to Israel the week before Pesach?

The answer to both those questions is spelled El Al Israel Airlines. More than twenty years after the US airline market was deregulated and more than ten years after flying within Europe got as low as 20 pounds round trip, Israel continues to erect trade barriers to protect the - now privatized - 'national carrier.' The damage to Israel's tourism industry because of all those people who don't come (I heard about empty tables at some hotels over Pesach because of people being bumped from their flights) is intolerable. But no one seems to have the capacity to fight it. As Haaretz points out in Friday morning's editions:
Ticket prices remain very high, low-cost airlines don't come here, and many people cannot afford to travel abroad. Many tourists, including Jews, don't come to Israel because of the high prices and the low availability. This harms the entire tourism sector, which could otherwise resolve some of the employment problems of the less-educated classes. Every 100,000 tourists who come to Israel create 4,000 jobs and contribute $200 million to the gross domestic product.

Last week, a Transportation Ministry committee published recommendations on the matter. The committee recommended deregulating the aviation sector, but created obstacles along the way, rendering its recommendations meaningless. The committee proposed "gradually" opening the skies. But given the political reality here, "gradual" means never - due to the powerful opposition from Israeli airlines.

The committee also determined that the state would cover Israeli airlines' security costs entirely; currently it covers half. The Finance Ministry won't agree to that. In addition, the committee makes the reform conditional on El Al agreeing to change a cabinet decision that made it the only carrier on most routes. El Al won't agree to that. And there are a few other conditions making it difficult to implement the deregulation recommendations.

But Transportation Minister Shaul Mofaz presented himself to the public as the man in the street. In response to the report, Mofaz declared, "If until now Mr. Cohen and Ms. Levy had trouble buying airline tickets abroad, after the reform it will be much easier for them to fulfill their dreams." Really? Very unlikely. Mofaz will have to work much harder - and it's not clear he wants to do that - to make us finally into a Western nation, where everyone already has easy access to cheap flights.
When will they ever learn? Israel has a sickness with keeping its economy closed and promoting market inefficiencies. For a smart people, we Jews can be awfully stupid.


At 6:16 AM, Blogger Jack Steiner said...

I know so many people who would go visit more frequently but for the price of airfare.

Here in LA the best price I can remember seeing was about $800 round trip, but it is usually closer to a grand.

It really is a challenge.


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