Just how far will flight costs fall?

May 25, 2013 21:45

I never thought I would say this, but British travellers can finally look forward to cheaper fares to Israel. This is because after eight years of negotiations, and incessant lobbying by former Tourism Minister Stas Misezhnikov, an Israel-European Union open skies agreement was signed last month.

From April 2014 any airline will be able to fly into Israel from any city in the 27 member states of the EU without restriction. Prime minister Benjamin Netanyahu, finance minister Yair Lapid and economics minister Naftali Bennett have all said at different times that the price of flights will drop dramatically.

Currently, each airline has to negotiate separately to fly into Israel and can only fly from the country in which they are registered. This is why there are so few scheduled direct flights from the UK — just two from Luton (El Al and easyJet), two from Heathrow (El Al, BA) and one from Manchester (Jet2. And even though easyJet is known as a low-cost airline, fares across the board are pretty similar.

By the time the open skies roll-out is complete in 2017, the scene should look very different. A quick internet search brings up several airlines who fly to Israel from the UK but with a stop-off or two. These include Alitalia, Iberia, Air Berlin, Lufthansa, Air France and Vueling. Any one of them could take up the mantle to fly direct.

Ryanair’s Michael O’Leary may well be a contender, having only last week confirmed his airline’s interest.

The EU-USA open skies model, which was implemented in 2008, saw a huge increase in competition but also in fare categories, making it difficult to compare prices. Nevertheless, on average, international fares fell by 20 per cent and sometimes up to 40 per cent in the first half of 2009, mainly on the premium seats.

On that basis, a decrease of 20 to 30 per cent on ticket prices to Israel —as predicted by the director of Israel Government Tourism Office in the UK, Naama Oryan-Kaplan, last week — would not be an unreasonable expectation. However, reductions may well be seen more in business class fares, with their higher mark-up, rather than economy.

The question is whether open skies will create a price war similar to that which followed the deregulation of European airspace in the 1990s. At that time, full-service airlines such as BA, had their profits dented by a combination of competition from low-cost carriers and the economic downturn. Some national airlines (Swiss Air, for example) even had to be baled out.

Speculation abounds, but I believe that open skies could reap benefits for flyers who can look forward to both cheaper flights and improved service as the process unfolds.

May 25, 2013 21:45

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