The IAA published today (16.3.2008) for public hearing a draft of a new block exemption for restrictive arrangements between airlines, following a comprehensive evaluation process.

Publication of the draft followed the enactment of a legislative amendment which annulled the exclusion of the aviation sector from antitrust scrutiny. Thus far, Paragraph 3(7) to the Antitrust Law stipulated that all forms of international sea and air transportation were immune from antitrust scrutiny. The statutory exemption implied that airlines could engage in various types of agreements, regardless of their consequences on competition and without the need for any authorization from the IAA. Following the reform and as part of its new powers, the IAA will have the mandate to enforce the provisions of the Antitrust Law on agreements between airlines that concern flights to and from Israel and evaluate their effect on competition. The draft block exemption touches upon a broad variety of agreements, including technical agreements, interline, code-sharing, block-seat and leasing agreements.

The draft block exemption distinct between two categories of agreements: Agreements that do not have a potential detrimental effect on competition and hence are not subject to approval. The second category is agreements that might harm competition and hence must be submitted to the IAA for approval. Among the latter are certain code-share agreements and block seat agreements. The block exemption take into account the need for efficient enforcement by the IAA that will focus on those agreements which raise competitive concerns alongside the need for legal certainty with regards to the new rules among airlines.

IAA Director General, Ronit Kan, emphasized that given the characteristics of the Israeli market and its dependence on air transport for trade and tourism, there is great importance for opening agreements between airlines to antitrust scrutiny. Enhancement of competition between airlines is expected to reduce prices, facilitate international trace, encourage tourism and contribute to economic growth.