The Israel Competition Authority has opened an investigation into the rise in fares on El Al Israel Airlines Ltd. (TASE:ELAL) flights. The examination is on the administrative track and not as part of the Authority's powers to investigate criminal activities.
El Al said, "Since the outbreak of the war and due to its consequences, El Al has been in an ongoing and transparent dialogue with the Competition Authority on the issue of fares. We have been conducting a careful pricing policy, adapted to the situation, and we believe that the examination will show that the company has behaved fairly and properly, despite the constraints of the situation."
Improved profitability despite the war
El Al's financial results for the fourth quarter of 2023, published at the end of February, showed dramatically improved profitability despite the war. Revenue was $678 million, up 21% from the corresponding quarter of 2022, and net profit was $40 million, up nearly 370% from $8.5 million in the fourth quarter of 2022. In the months following the start of the war most foreign airlines halted flights to and from Israel leaving El Al with a monopoly of most of the routes from Tel Aviv.
Adv. Dana Tirangel-Lipka, partner and head of the antitrust and competition law department at Amit Pollak & Matalon (APM) law firm, who in the past has held positions at the Israel Competition Authority, explains, "The Competition Authority Commissioner can impose on the company a sanction of up to 8% of sales revenue and not more than NIS 100 million. The Commissioner's discretion is broad and she can also impose a NIS 1 million fine on the company's executives, with a very broad definition, not just the CEO but an official responsible for the subject."
The threshold of proof, she explains, is administrative, in other words 51%, and the procedure includes the examination, letters, a hearing and the ruling and the company can appeal to the antitrust court.
Regarding El Al, Adv. Tirangel-Lipka believes that the reason for the examination is overpriced fares, an action that is relevant only to those who have a monopoly. El Al, she explains, is defined as a monopoly only in specific markets, such as Bangkok and Johannesburg, but it could be determined that during the war it had a monopoly in other markets as well.
She adds that the Israel Competition Authority does not really like pursuing the issue of overpricing, but it has pursued such cases in the past. War, on the other hand, is not a situation where a company did anything special to "gain" a price increase, but external circumstances led to it. That's why this case, she estimates, "is not one of the complex ones that the Authority has known."
Published by Globes, Israel business news - en.globes.co.il - on April 3, 2024.
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