April 21 (Bloomberg) -- Israel’s Cabinet today approved an agreement with the European Union meant to increase competition in air travel, defying a protest strike that crippled local carriers’ outgoing flights.
The Cabinet vote was the first major test of the new government’s declared resolve to introduce greater competition to Israel’s concentrated economy and lower the cost of living. High housing and food prices fueled mass protests nearly two years ago, and Finance Minister Yair Lapid took up the protesters’ cause in his recent campaign for parliament.
Prime Minister Benjamin Netanyahu lauded the “Open Skies” accord, which will let carriers on both sides fly to more destinations.
“The purpose of the reforms we approved today is to lower the prices of flights to and from Israel and to increase incoming tourism,” Netanyahu told the weekly Cabinet meeting in Jerusalem, according to a text message from his office.
Airline and union officials said the agreement would crush the local aviation industry, and thousands of workers went on strike at 5 a.m. today.
Israel’s national carrier, El Al Israel Airlines Ltd., canceled departing flights, as did two smaller local airlines, Israir Airlines & Tourism Ltd. and Arkia Israeli Airlines Ltd., said Israel Airports Authority spokesman Ofer Lefler.
El Al Sinks
El Al shares sank as much as 10.2 percent and were trading down 8.1 percent, the most since Dec. 17, at 0.533 shekel, as of 3:04 p.m. in Tel Aviv.
Israel’s national Histadrut labor federation had urged the government to delay today’s vote and begin negotiations to protect workers’ rights.
“Implementation of the agreement in its current form could have serious, irreversible and fatal consequences for Israel’s airline industry and for tens of thousands of workers and their families,” Histadrut chairman Ofer Eini said in an e-mailed statement.
Israel and the EU initialed the agreement in July. It could go into effect as early as next year, or be implemented gradually over five years to let local airlines prepare for the industry’s “new competitive structure,” the Finance Ministry said in an e-mailed statement.
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